Bancroft Capital has been dropped from a post-IPO ‘pump and dump’ lawsuit

Lawyers for a Singapore investor have voluntarily dismissed Fort Washington investment firm Bancroft Capital LLC from a federal lawsuit over the drop in value of Fitness Champs Holdings Ltd., a Singapore swimming-education company that Bancroft took public last year.

Fitness Champs was one of nearly 200 small companies sold by investment firms in initial public stock offerings (IPOs) on the Nasdaq Capital Market in 2024 and 2025, many of which rose to unexpected highs before collapsing in value and leaving shareholders with losses.

Nasdaq and the Securities & Exchange Commission blamed “pump and dump” schemes by third-party social-media stock promoters, who bought shares at low IPO prices, deceived members of the public into bidding up the shares, then dumped the shares at inflated prices, pocketing fat profits at other investors’ expense. Nasdaq last winter enacted IPO limits that would have blocked many such companies from going public.

Singapore-based investor Lim Yen Nee brought the suit in federal court in New York against Fitness Champs and its executives. Her lawyers sought to broaden liability for post-IPO losses by pinning some of the blame on professional firms who helped prepare the company to go public. Her suit named the investment bank as a codefendant, along with Fitness Champs’ Singapore-based auditor.

Lim agreed to drop Bancroft as a defendant after Bancroft’s lawyer Jaimie Nawaday warned in a May 19 letter to Lim’s lawyers that federal securities law doesn’t support cases against parties only “tangentially” connected or allow “tossing Bancroft into a catch-all group” without showing how it was allegedly responsible for investor losses.

Nawaday cited a March federal court ruling against a union pension fund that sued Clarivate PLC, the academic research group whose U.S. headquarters is in Philadelphia, after that company’s stock fell. She also warned that the Fitness Champs suit failed to specify who at Bancroft allegedly made any “fraudulent” statements, as the law requires in securities fraud cases.

To allow such complaints against IPO sellers with no stated ties to post-IPO fraud “would expose every underwriter of every initial public offering that subsequently experiences volatility” to fraud allegations, she said.

While the suit noted that other Bancroft IPOs also had “collapsed shortly after the IPO,” it’s not unusual when small-company IPOs lose money for investors, according to the letter. Nawaday said the complaint failed to tie anything Bancroft did or failed to do to a “pump and dump” scheme or to investors’ losses.

On May 18, the day before Bancroft’s lawyer wrote the letter requesting the firm’s dismissal from the Fitness Champs suit, New York law firm Wolf Haldenstein Adler Freeman & Herz LLP announced it was investigating and seeking shareholders of Magnitude International, a Singapore contracting firm, noting it had also been taken public by Bancroft. Trading in that stock was stopped in December by Nasdaq and the SEC. The SEC cited “potential manipulation” of the stock by “unknown persons” using social media.

Wolf Haldenstein did not respond to inquiries.