Securities Class Action Filing Activity Increased Slightly in 2023, Reversing Recent Years’ Declines

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Increase comes despite a drop in Section 11 and cryptocurrency-related filings.

The number of securities class action lawsuits increased slightly in 2023, reversing the trend of decline over the last three consecutive years, according to a report released today by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.

Core filings without Section 11 allegations more than compensated for the large decline in Section 11 filings.

The report, Securities Class Action Filings—2023 Year in Review, found that plaintiffs filed 215 securities class action lawsuits in federal and state courts in 2023, up slightly from 208 filings in 2022. The number of “core” filings—those excluding M&A filings—also increased slightly from the previous year. However, despite a small uptick in overall filing volume, the number of state 1933 Act filings and combined federal Section 11 and state 1933 Act filings fell in 2023. The number of filings in the three most common trend categories—SPAC, COVID-19, and cryptocurrency—also all fell in 2023.

“In 2023, the number of combined federal Section 11 and state 1933 Act filings and state-only filings decreased by 62% and 82%, respectively,” said Alexander “Sasha” Aganin, the report’s coauthor and a Cornerstone Research senior vice president. “While this could have otherwise contributed to an overall decrease in filings, core filings without Section 11 allegations were up 26%, and more than compensated for the large decline in Section 11 filings.”

In addition to a large decrease in Section 11 filings, the share of core federal filings related to SPACs, COVID-19, and cryptocurrency fell by more than 15 percentage points to less than 20% in 2023, despite these still being the most common trend categories. Cryptocurrency-related filings decreased by 39% from their 2022 peak, with 11 of the 14 cryptocurrency-related filings brought in the first half of 2023. Core SPAC filings also fell by 39% year-over-year, while COVID-19-related filings decreased by 50%. Nine securities class actions related to the 2023 Banking Turbulence were filed—one in the second half of 2022 and eight in 2023—representing an emerging trend category.

Despite an increase in overall filings, the aggregate filing size decreased when measured by Disclosure Dollar Loss (DDL), falling 46% from $618 billion in 2022 to $335 billion in 2023, and returning to 2019–2021 levels. Conversely, the aggregate filing size as measured by Maximum Dollar Loss (MDL) increased to $3.2 trillion, the second-highest amount on record. In 2023, the 44 mega MDL filings accounted for $2.9 trillion, or 90% of total MDL.

Crypto prices rebounded in the second half of the year. When prices are up, damages are harder to allege so litigation declines.

“Given dramatic allegation of massive frauds in the crypto markets, ranging from FTX to Binance, observers might reasonably be mystified by the decline in private crypto litigation,” observed Joseph Grundfest, professor at Stanford Law School and a former SEC Commissioner. “But there is a simple explanation. Crypto prices rebounded in the second half of the year. When prices are up, damages are harder to allege so litigation declines.” 

Securities Class Action Filings—2023 Year in Review

Key Trends
  • While the likelihood of core filings targeting U.S. exchange-listed companies in 2023 increased slightly from 2022, the likelihood of an S&P 500 company being the subject of a core federal filing nearly doubled year-over-year to 7.1%.
  • In 2023, there were 44 mega MDL filings with a total mega MDL of $2.9 trillion, a 30% increase from 2022 and the second-highest value on record. Conversely, there were 16 mega DDL filings in 2023, down from 18 in 2022. Total mega DDL decreased by 60% in 2023.
  • Core federal filings in the Second Circuit declined for the second consecutive year, falling to 50 in 2023, below the 1997–2022 annual average of 56. This decline was more than compensated by increases in filings in the Third and Ninth Circuits.
  • From 2019 to 2022, 35% of core SPAC filings were resolved, just over half the resolution rate for all other core federal filings.
About the Stanford Law School Securities Class Action Clearinghouse

The Securities Class Action Clearinghouse is an authoritative source of data and analysis on the financial and economic characteristics of federal securities fraud class action litigation. The SCAC maintains a database of more than 6,500 securities class action lawsuits filed since the passage of the Private Securities Litigation Reform Act of 1995. The database also contains copies of complaints, briefs, filings, and other litigation-related materials filed in these cases.