SAN FRANCISCO (CN) - A federal judge gave preliminary approval to a class action settlement of claims that video game developer Zynga artificially inflated its share prices.
Lead plaintiff David Fee claimed in the 2012 lawsuit that Zynga executives, aware of the company's poor financial condition, sold their shares of the company for hundreds of millions of dollars - allowing them to shift the company's revenue losses from the first quarter to the second quarter of 2012, which artificially inflated the price of Zynga stock during the first quarter.
By the time Zynga disclosed its true financial status, its stock price had fallen 37 percent in a single day, according to U.S. Magistrate Judge Jacqueline Corley's order.
Corley preliminarily approved a $23 million settlement fund. Deducted from the fund will be taxes, attorneys' fees, litigation costs and notice and claims-administration expenses.
The plaintiff class consists of Zynga shareholders who purchased their stock between Dec. 15, 2011 and the close of trading on Feb. 14, 2012.
If all class members make claims, they will receive $0.15 per share purchased, the order said.
Jeffrey Norton, who represents the plaintiffs, said in a telephone interview that he expects about 100,000 claimants.
Corley said in her ruling that the settlement "appears to be the product of serious, informed, non-collusive negotiation."
She set a final fairness hearing for Jan. 28, 2016.
Norton said that he was very pleased with the settlement's terms.
"We feel confident that it will get final approval, and we think it's a fantastic settlement for the class," he said.
The defendants' counsel did not respond to request for comment on Thursday morning.
Norton is with Newman Ferrara, in New York City.
The defendants are represented by Anna White, with Morrison & Foerster in San Francisco.
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