MEMORANDUM AND ORDER Headquartered in Beijing, Defendant China Techfaith Wireless Communication Technology Limited (“Techfaith”) trades on Nasdaq. After announcing that it would write off almost $30 million in bad debt, its share price dropped significantly. This litigation against the company, its principals, and its auditors followed. The Plaintiffs allege that Techfaith violated section 10(b) of the Securities Exchange Act of 1934 by making false and misleading statements in various financial statements, and that Defendants Defu Dong, Deyou Dong and Yuping Ouyong (collectively, “Individual Defendants”) are liable for those misstatements under section 20(a) of the Act. Plaintiffs further allege that Defendants Deloitte Touche Tohmatsu Certified Public Accountants LLP and Friedman LLP violated section 10(b) by falsely opining that the financial statements conformed to generally accepted accounting principles. Techfaith and the Individual Defendants move to dismiss. Friedman separately moves to dismiss.1 Both motions are brought pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motions are granted. I The following facts are taken from the amended complaint and Techfaith’s SEC filings, which are referenced throughout the complaint and clearly form the basis of the Plaintiff’s claims. “[W]hen a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint, the court may nevertheless take the document into consideration in deciding the defendant’s motion to dismiss, without converting the proceeding to one for summary judgment.” Int’l Audiotext Network, Inc. v. AT&T, 62 F.3d 69, 72 (2d Cir. 1995) (internal quotation marks omitted). Techfaith was founded in 2002 by Defu Dong. Its principal business was to design mobile devices and subcontract their production. Initially, the company provided the finished devices to third parties, who would sell them under their brands. Eventually, it began selling devices under its own brands. Defu served as Techfaith’s chief executive officer until 2015, when he passed the title to his younger brother, Deyou, who had been the company’s chief operating officer. Two years later, Defu transferred almost all of his controlling ownership interest to Deyou. As of 2018 Deyou was the CEO, chairman of the board and controlling shareholder of Techfaith. Yuping Ouyang is the company’s chief financial officer. In 2010 — while still running Techfaith — Defu founded Beijing Mfox Technology Company Limited (“Mfox”);2 he remains its controlling shareholder. The crux of the Plaintiffs’ complaint is that, beginning in 2010, Defu and Deyou “carried out a scheme to loot China Techfaith’s business” by “moving substantially all of China Techfaith’s operations, personnel, and even cash, from China Techfaith to Mfox.” Am. Compl.
41, 43. The complaint alleges that this scheme took three forms: First, the complaint alleges that Defu and Deyou used Mfox to “[steal] China Techfaith’s mobile phone business.” Am. Compl. 49. Techfaith began to sell phones under the brand 17FOX in 2012 and under the brand MOBIFOX in 2013. In various filings with the Securities Exchange Commission (“SEC”), the company referred to 17FOX and MOBIFOX as “our brands.” Am. Compl.
