A new complaint was filed against Zeta Global Holdings Corp. (ZETA) by shareholder (plaintiff) Armin Davoodi on November 22, 2024, in the U.S. District Court for the Southern District of New York. The defendants in the complaint are the company, director and CEO David Steinberg, and CFO Christopher Greiner.
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The plaintiff alleges that they purchased ZETA stock at artificially inflated prices between February 27, 2024 and November 13, 2024 (the “Class Period”). The plaintiff is now seeking compensation for the financial losses incurred during this period. To learn more about the lawsuit, click here.
Zeta Global is a marketing technology company that enables companies to grow, acquire, and retain customers through proprietary AI (artificial intelligence)-powered cloud and data analytics solutions.
The filed complaint alleges that during the Class Period, the defendants misled ZETA investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, Zeta Global Holdings intentionally misrepresented information presented in its financial statements submitted to the U.S. SEC (Securities and Exchange Commission). The plaintiff alleges that the defendants failed to exercise proper oversight and control over the preparation and submission of public financial statements.
In particular, the complaint mentions that the defendants allegedly inflated its data bank, boasting over 240 million opted-in Americans and 535 people worldwide. Furthermore, the plaintiff alleges that Zeta artificially inflated its revenue figures to show solid year-over-year growth.
For Fiscal 2023, Zeta reported over 20% revenue growth and a 12% increase in customer count compared to the prior year. The company’s annual report filed with the SEC boasted Zeta’s business model as possessing “the industry’s largest opted-in data set.”
The robust revenue growth continued throughout Fiscal 2024, and unfortunately, the defendants were allegedly fully aware that these numbers were artificially ballooned.
Zeta Global Allegedly Misrepresented Key Information
In contrast to the claims made by ZETA and the defendants, the company had purportedly inflated the revenue numbers through 2023 and 2024.
The truth became clear on November 13, 2024, when a Culper Research report questioned the reliability and authenticity of Zeta’s data set model. The research firm released a report labeled “Zeta Global Holdings Corp (ZETA): Shams, Scams, and Spam.” The report noted that Zeta tricked customers into sharing their personal information by operating over 40 bogus websites and job portals.
Furthermore, the report accused Zeta of operating a “two-way” contract with third-party “consent farms” through which both parties sold data back and forth, thus pumping up their revenues. The report quoted that owing to this practice, nearly 56% of Zeta’s revenues were inflated. Following the news, ZETA stock cratered 37%, causing massive damages to shareholder returns.
To conclude, the defendants allegedly misled investors about the robust revenue growth from the data set model, by undertaking malicious accounting practices and tricking customers to share private data.
