(CN) – A federal judge in Manhattan tentatively approved a proposed $586 million settlement of 309 class actions accusing underwriters, including many of the biggest Wall Street firms, of forcing investors to overpay for stock in technology companies that went public in the late 1990s, causing investors to lose billions of dollars in the dot-com bust.
The settlement ends eight years of litigation over claims that the issuers and underwriters of hundreds of initial public offerings (IPOs) cheated investors who expected to buy shares at the typically lower IPO price. Instead, investors said the underwriters made them buy shares in the aftermarket – from other investors instead of the issuer – often at inflated prices.
The underwriters included Credit Suisse Group, Morgan Stanley, Merrill Lynch, Bank of America, JPMorgan Chase, Goldman Sachs and Citigroup.
They also accused the underwriters of preparing analyst reports that contained inaccurate information and recommendations, making the tech companies sound like more attractive investments than they were.
On April 1, the defendants agreed to settle the claims for $586 million, plus $10 million in administrative costs and about a third extra in attorneys’ fees.
The plaintiffs of each class action will receive a pro rata share ranging from $300,000 up to $20 million.
U.S. District Judge Shira Scheindlin granted the plaintiffs’ motion for an order: “(1) preliminarily approving the proposed stipulation only; (2) certifying the settlement classes for the purposes of proposed stipulation only; (3) approving the form and program of class notice described in the stipulation; and (4) scheduling a hearing before the court to determine whether the proposed stipulation should be finally approved.”
The fairness hearing is scheduled for Sept. 10.