The court of appeals affirmed a district court judgment in part, reversed in part, vacated in part, and remanded the action for further proceedings. The court held that a plaintiff suing under Securities and Exchange Act §10(b) seeking rescission must demonstrate economic loss and loss causation.
Kenneth Weiss formed Strategic Diversity, Inc. in 2001 to invest funds in an alternative fuel start-up called Alchemix Corporation. The investment was structured as a note which gave Weiss the option to convert the obligation to shares of stock. Weiss obtained a seat on the Alchemix Board shortly after his investment. Weiss also obtained secured interests in certain of Alchemix’s intellectual property, as well as anti-dilution protections.
