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Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 1 of 77
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`POMERANTZ LLP
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`Jennifer Pafiti (SBN 282790)
`1100 Glendon Avenue, 15th Floor
`Los Angeles, California 90024
`Telephone: (310) 405-7190
`E-mail: jpafiti@pomlaw.com
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`Lead Counsel for Lead Plaintiffs
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`[Additional Counsel on Signature Page]
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN FRANCISCO DIVISION
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`HUEI-TING KANG and
`ARTHUR FLORES,
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`Plaintiffs,
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`Defendants.
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`CASE NO.: 3:21-cv-06468-CRB
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`CLASS ACTION
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`HON. CHARLES R. BREYER
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`AMENDED CLASS ACTION
`COMPLAINT FOR VIOLATIONS
`OF THE SECURITIES LAWS
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`JURY TRIAL DEMANDED
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`14
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`v.
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`PAYPAL HOLDINGS, INC., et al.,
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-i-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 2 of 77
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`TABLE OF CONTENTS
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`Page
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`TABLE OF CONTENTS ..................................................................................................... i
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`TABLE OF DEFINITIONS ............................................................................................... iv
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`NATURE OF THE ACTION .............................................................................................. 1
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`A. The CFPB Investigation into PayPal Credit & Continuing Violations ................... 3
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`B. Regulatory Problems with Interchange Fees, Including the SEC Investigation ..... 6
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`C. Investors React Negatively at the News that the Company’s Risk of Regulatory
`Scrutiny Has Materialized ....................................................................................... 7
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`JURISDICTION AND VENUE .......................................................................................... 8
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`PARTIES ............................................................................................................................. 9
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`SUBSTANTIVE ALLEGATIONS ................................................................................... 10
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`A. Background ........................................................................................................... 10
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`B. PayPal Credit’s Checkered History of CFPA Violations and the 2015
`Consent Order ....................................................................................................... 11
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`C. Continued Violations of the 2015 Consent Order and Federal Consumer
`Financial Laws Significantly Increased the Likelihood of Regulatory Scrutiny
`and Investigations Throughout the Class Period ................................................... 14
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`1.
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`PayPal Credit’s Deferred Interest Offerings Violated the CFPA’s
`Prohibitions Against Deceptive, Unfair, and Abusive Practices
`Throughout the Class Period ..................................................................... 14
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`i. PayPal is Subject to the CFPA ...................................................... 15
`ii. PayPal Engaged in Deceptive, Unfair, and Abusive Practices
`Throughout the Class Period in Violation of both the 2015
`Consent Order and the CFPA ........................................................ 17
`2. The Misleading Promotions to Students Offering PayPal Credit
`Violated Regulation Z Throughout the Class Period ................................ 26
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`3.
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`PayPal Continues to Violate Federal Statutes and Regulations Despite
`Misleading, Public Assurances that it Would Stop ................................... 29
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`D. PayPal’s Participation in a Shadow Banking Scheme that Circumvents and
`Evades Federal Regulations Substantially Increased the Risk of Regulatory
`Scrutiny and Investigations Throughout the Class Period .................................... 31
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`PAYPAL AND THE INDIVIDUAL DEFENDANTS MADE FALSE OR
`MISLEADING STATEMENTS DURING THE CLASS PERIOD ................................. 38
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`LOSS CAUSATION ......................................................................................................... 52
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-ii-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 3 of 77
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`ADDITIONAL ALLEGATIONS OF SCIENTER ........................................................... 54
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`A. The Individual Responsibilities Imposed by the 2015 Consent Order on
`PayPal’s Board of Directors and Senior Management Raise a Strong
`Inference of Scienter ............................................................................................. 54
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`B. The Individual Defendants Knew About the SBPC’s Findings yet Failed to
`Take Appropriate, Corrective Actions Despite False Assurances
`to the Contrary ....................................................................................................... 56
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`C. Defendants’ Own Statements Support an Inference of Scienter ........................... 55
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`D. Any Assumption Regarding Defendants’ Lack of Knowledge that
`PayPal’s Debit Cards Skirted Regulation II is Absurd ......................................... 57
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`E. Schulman’s and Rainey’s Stock Sales Enhance an Inference of Scienter ............ 59
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`LEAD PLAINTIFFS’ CLASS ACTION ALLEGATIONS ............................................. 61
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`COUNT I ........................................................................................................................... 63
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`COUNT II ......................................................................................................................... 66
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`COUNT III ........................................................................................................................ 68
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`PRAYER FOR RELIEF .................................................................................................... 69
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`DEMAND FOR TRIAL BY JURY .................................................................................. 69
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`CERTIFICATE OF SERVICE .......................................................................................... 72
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 4 of 77
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`TABLE OF DEFINITIONS
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`Term or Acronym
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`Definition
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`2015 Consent Order
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`The Consent Order between the Consumer Financial Protection
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`Bancorp
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`Bland
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`Bureau and PayPal, entered into on May 20, 2015
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`The Bancorp Bank, Inc.
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`Defendant Doug Bland, Vice President and General Manager of
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`PayPal Credit
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`Braintree
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`Braintree Payments, a PayPal-owned product that automates online
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`payments for merchants by providing payment gateways and
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`billing, storage and other payment related support
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`CEO
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`CFO
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`CFPA
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`CFPB
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`Chief Executive Officer
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`Chief Financial Officer
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`Consumer Financial Protection Act
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`Consumer Financial Protection Bureau
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`CFPB Complaint
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`CFPB v. PayPal, Inc. and Bill Me Later, Inc., No. 1:15-cv-01426,
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`(D. Md. May 19, 2015)
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`CID
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`Civil Investigative Demand
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`Class Period
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`April 27, 2016 to July 28, 2021
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`Clearing House
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`Clearing House Association, LLC
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`Association
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`Company
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`Complaint
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`CW
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`EFTA
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`PayPal Holdings, Inc.
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`Amended Complaint
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`Confidential Witness
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`Electronic Fund Transfer Act of 1978
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`Exchange Act
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`The Securities Exchange Act of 1934
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`Federal Reserve
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`Board of Governors of the Federal Reserve System
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`Gallo
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`GGR
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`Defendant Joseph Gallo, Director of Communications at PayPal
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`Global Government Relations
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`Individual Defendants
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`Defendants Daniel Schulman, John Rainey, Doug Bland, and
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`Lead Plaintiffs
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`Lead Plaintiffs Huei-Ting Kang and Arthur Flores
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`Joseph Gallo
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-iv-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 5 of 77
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`Marqeta
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`NASDAQ
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`Marqeta, Inc.
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`National Association of Securities Dealers Automated Quotation
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`PayPal
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`PayPal Holdings, Inc.
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`Global Select Market
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`PayPal Credit
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`An open-end, revolving credit line built into a PayPal account that
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`allows an account holder to pay for purchases online over a
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`specified period after a credit application is approved by PayPal
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`PYPL
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`Rainey
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`PayPal’s stock ticker
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`Defendant John Rainey, CFO of PayPal
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`Regulation II
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`Federal Reserve Debit Card Interchange Fees and Routing
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`Regulation pursuant to Section 1075 of the Electronic Fund
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`Transfer Act of 1978
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`Regulation Z
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`The Consumer Financial Protection Bureau’s implementing
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`SBPC
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`Student Borrower Protection Center
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`regulation to the Truth in Lending Act
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`SBPC Letters
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`Letters sent from the Student Borrower Protection Center dated
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`August 21, 2020 to Defendants PayPal and Schulman, and to the
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`Director of the CFPB and the Acting Comptroller of the Currency
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`SBPC Report
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`Student Borrower Protection Center report on Shadow Student
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`Debt: Shadow Student Debt, STUDENT BORROWER PROTECTION
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`SEC
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`Schulman
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`Square
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`CENTER, July 2020
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`U.S. Securities and Exchange Commission
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`Defendant Daniel Schulman, CEO of PayPal
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`Square Inc., now known as Block Inc.
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`Sutton
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`Sutton Bank
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`Synchrony
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`Synchrony Bank
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`TILA
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`Venmo
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`Truth in Lending Act
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`A social payments service owned by PayPal that enables
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`consumers to make and share payments online
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-v-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 6 of 77
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`Lead Plaintiffs Huei-Ting Kang and Arthur Flores (referred to herein as “Lead Plaintiffs”
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`or “Plaintiffs”), individually and on behalf of all other persons similarly situated, by their
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`undersigned attorneys, for their Amended Class Action Complaint for Violations of the Federal
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`Securities Laws (the “Amended Complaint”) against Defendants (defined below), allege the
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`following based upon personal knowledge as to those allegations concerning Lead Plaintiffs and,
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`as to all other matters, the investigation conducted by and through their attorneys, including, among
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`other things, a review of the Defendants’ public statements and filings made with the United States
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`Securities and Exchange Commission (“SEC”), wire and press releases either issued by or
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`regarding PayPal Holdings, Inc. (“PayPal” or the “Company”), published analysts’ reports about
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`the Company, information obtained from interviews with knowledgeable former employees of the
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`Company and other persons with knowledge regarding these allegations (hereafter the Confidential
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`Witnesses or the “CWs”), and other information obtainable on the Internet. Lead Plaintiffs believe
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`that substantial evidentiary support exists for the allegations set forth herein after a reasonable
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`opportunity for discovery.
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`NATURE OF THE ACTION
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`1.
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`This is a class action on behalf of all persons and entities who purchased or
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`otherwise acquired PayPal’s publicly traded common stock during the period from April 27, 2016
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`through July 28, 2021, both dates inclusive (the “Class Period”), seeking to pursue remedies under
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`Sections 10(b) and 20(a), 15 U.S.C. §§ 78(j)(b) and 78t(a), of the Securities Exchange Act of 1934
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`(“Exchange Act”) and Rule 10b-5, 17 C.F.R. § 240.10b-5 promulgated thereunder. Excluded from
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`the Class are Defendants herein; the officers and directors of the Company during the Class Period,
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`and, at all relevant times, any entity in which any of the Defendants have or had a controlling
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`interest; and the affiliates, immediate family members, legal representatives, heirs, successors or
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`2.
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`PayPal is a digital payments company and technology platform, based in San Jose,
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`California, that enables consumers and merchants to send and receive payments on the Internet.
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`Its Proprietary Payments platform consists of seven core products, two of which are relevant here:
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`PayPal Credit and Venmo. During the Class Period, Defendants made misleading representations
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-1-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 7 of 77
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`about compliance to conceal or downplay two significant regulatory problems: (1) ongoing,
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`systematic violations of a Consent Order entered in May 2015 following an investigation into
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`PayPal Credit by the Consumer Financial Protection Bureau (“CFPB”), and (2) the issuance of
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`debit cards, including the Venmo debit card, in violation of federal law.
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`3.
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`PayPal Credit is an open-end, revolving credit line built into a PayPal account that
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`allows an account holder to pay for purchases online over a specified period after a credit
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`application is approved by PayPal. During the Class Period, Defendants considered PayPal Credit
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`to be one of their most important divisions because it was a significant provider of revenues that
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`produced extremely high margins. PayPal Credit’s core offering is a buy now, pay later financing
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`arrangement on purchases over $99. No interest is charged if the balance is paid within six months
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`of the purchase date, but interest is automatically charged and compounded from the date of
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`purchase if the consumer fails to pay any part of the full balance within six months.
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`4.
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`Like PayPal, Venmo is a social payments service that enables consumers to make
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`and share payments online. It was acquired by PayPal in 2013. It has recently experienced
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`explosive growth, and its revenues have skyrocketed from $200 million in 2018 to nearly $1
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`billion in 2021 and are expected to double in 2022 given its intense popularity with millennials
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`and the rapid acceleration of online payments due to current market conditions. Nearly 30% of
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`this revenue is attributable to unreasonable and disproportionate interchange fees that PayPal earns
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`from the Venmo debit card.
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`5.
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`Interchange fees are paid to the issuer of a debit card that holds the debit
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`cardholder’s account. Typically, the issuer is a bank that both issues the debit card under its own
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`brand and actually holds the customer’s account. However, federal statutes and regulations cap
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`the amount of interchange fees that large issuers can charge to limit costs for consumers and
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`promote competition in the market. To evade and circumvent this cap, PayPal contracts with
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`smaller banks such as The Bancorp, Inc., (“Bancorp”) to claim that the smaller bank is the issuer,
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`even though the bank does not hold the customer’s account. During the Class Period, PayPal also
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`earned interchange fees from the PayPal Business MasterCard and the PayPal Cash Card. These
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-2-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 8 of 77
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`debit cards are also issued in partnership with Bancorp, and similarly evade and circumvent the
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`regulatory cap on interchange fees.
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`A. The CFPB Investigation into PayPal Credit & Continuing Violations
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`6.
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`Before the Class Period began, in May 2015, the CFPB filed a complaint against
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`PayPal and a proposed Consent Order (hereafter “the 2015 Consent Order”) that was subsequently
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`entered in the U.S. District Court for the District of Maryland. The CFPB’s investigation found
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`that PayPal violated the Consumer Financial Protection Act of 2010 (“CFPA”) in numerous ways
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`by engaging in unfair, deceptive and abusive acts and practices in connection with the offering,
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`marketing, providing and servicing of PayPal Credit. Specifically, and of particular relevance to
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`this Action, the CFPB found that PayPal (1) enrolled customers in PayPal Credit without their
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`consent, (2) failed to clearly and prominently explain the terms and conditions of a deferred
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`interest offer, (3) misrepresented the terms and conditions of promotional offers associated with
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`PayPal Credit, and (4) failed to ensure that merchants who offered PayPal Credit honored
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`promotions or provided customers with at least the benefit of the offer as represented in the
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`promotion. CW1, a highly placed former employee who served as the Head of Compliance for
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`U.S. Credit and U.S. Operations during the Class Period until March 2018, confirms that the
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`CFPB, and the 2015 Consent Order, was particularly concerned about the impact of misleading
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`deferred interest promotions, and that the focus was to make sure that consumers understood what
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`7.
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`The 2015 Consent Order enjoined and restrained PayPal and the Individual
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`Defendants named in this Action from misrepresenting any terms and conditions regarding
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`deferred interest and requires them to ensure that any merchant that offers PayPal Credit honors
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`the offer and provides the consumer with at least the benefit of the promotion as it was represented
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`by the merchant. Thus, the 2015 Consent Order squarely required PayPal to ensure that merchants
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`did not misleadingly claim free interest for six months without explaining that interest is
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`compounded from the date of purchase if the consumer fails to pay the full balance within six
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
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`-3-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 9 of 77
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`8.
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`Throughout the Class Period, Defendants repeatedly violated the 2015 Consent
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`Order and several federal consumer financial laws by (1) enrolling customers in PayPal Credit
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`without their knowledge or consent, (2) misrepresenting the terms and conditions of PayPal
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`Credit’s deferred interest offers, and (3) failing to ensure that merchants who offered PayPal Credit
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`honored promotions or provided customers with at least the benefit of the offer as represented in
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`the promotion.
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`9.
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`The fact that PayPal Credit’s terms and conditions on merchants’ websites misled
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`consumers during the Class Period cannot be the subject of reasonable dispute. On July 17, 2020,
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`the Student Borrower Protection Center (“SBPC”), a nonprofit organization focused on alleviating
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`the burden of student debt, released a report entitled “Shadow Student Debt,” in which it described
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`how PayPal Credit was offered as a method of payment for tuition expenses at unaccredited
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`schools that are otherwise ineligible for federal student loans. Deferred interest promotions in fact
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`spurred the CFPB to take action against the Company nearly six years ago, which resulted in the
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`2015 Consent Order.
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`10.
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`On August 21, 2020, the SBPC sent letters to the CFPB and Defendant Daniel H.
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`Schulman (“Schulman”), the Chief Executive Officer (“CEO”) of PayPal, explaining how PayPal
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`Credit was marketed to vulnerable students with misleading deferred interest promotions. These
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`letters described how PayPal Credit was misleadingly promoted at 150 identified predatory for-
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`profit educational institutions. On the very same day, Defendants, in an attempt to blunt the impact
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`of the letters and manage the decline in the Company’s stock price, launched a media campaign
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`to deflect attention away from the Company, including publicly committing to remove the
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`misleading promotions, stating that PayPal had already started to remove them, and misleadingly
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`distancing the Company from the underlying misconduct through claims that PayPal had “no
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`direct relationship” with the predatory for-profit educational institutions. The media campaign
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`worked. The price of the Company’s common stock declined by less than 1% on August 21, 2020
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`as a direct result of the Defendants’ misleading statements.
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`11.
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`PayPal’s media campaign, however, was false and misleading. The accounts of
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`several CWs and Defendants’ own statements confirm that merchants are vetted by PayPal and
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
`
`
`-4-
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`

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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 10 of 77
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`the Company’s internal policies are designed to ensure that both it and its merchants comply with
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`the law. In particular, the 2015 Consent Order specifically requires PayPal to ensure that
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`merchants provide promotional offers exactly as they are advertised even if that was not what the
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`advertisement intended. Lead Plaintiffs’ own investigation, as fully detailed herein, shows that
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`numerous for-profit educational institutions misleadingly promoted deferred interest loans
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`through PayPal Credit to vulnerable students throughout the Class Period and many of them
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`continue to do so even as of today despite PayPal’s false assurances to remediate the problem in
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`the summer of 2020 after the SBPC reported the Company to the CFPB.
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`12.
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`Defendants’ statements to investors concealed their violations. In SEC filings, they
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`falsely or misleadingly claimed that the Company was then “work[ing] to ensure compliance”
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`with the 2015 Consent Order, was “monitor[ing]” laws “closely” to ensure compliance and that
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`its interests were perfectly “aligned” with regulators. During the Class Period, Defendants
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`Schulman and John Rainey (“Rainey”), PayPal’s Chief Financial Officer (“CFO”), also repeatedly
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`touted PayPal’s “world class” compliance regime that they claimed was a “role model” to others
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`because the Company was laser-focused on compliance and was compliant with “any and all
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`regulatory environments out there.” Defendant Doug Bland (“Bland”), the head of Global Credit
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`and the senior executive in charge of PayPal Credit, made misleading statements about the
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`transparency of PayPal Credit’s terms and conditions long after the Company was put on notice
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`about the continued violations of the 2015 Consent Order. Defendants never stopped making such
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`misleading statements even after Schulman knew about the SBPC’s concerns, and sent PayPal
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`representatives to personally discuss the letter with the SBPC, as a CW from the SBPC confirms
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`(“CW2”), and, despite representing to the contrary, failed to remove all the misleading promotions
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`that PayPal Credit offered to vulnerable students as confirmed herein. At the very least, the risk
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`of regulatory scrutiny and subsequent investigations had effectively materialized after the SBPC
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`reported PayPal to the CFPB, but Defendants never tempered their misleading statements at any
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`13.
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`Defendants made their misleading statements with scienter. The 2015 Consent
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`Order expressly placed responsibility on PayPal’s Board of Directors and the Individual
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
`
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`-5-
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`

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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 11 of 77
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`Defendants, as members of PayPal senior management, to take specific steps to ensure that PayPal
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`did not enroll customers in PayPal Credit without their consent or misrepresent the terms and
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`conditions of any deferred interest offer and otherwise ensure that PayPal complied with the 2015
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`Consent Order and all federal consumer financial laws. Their failure to do so was at least reckless.
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`Defendants touted PayPal’s compliance program, which purportedly included the actions of its
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`merchants, to investors, even as they had known about the violations since at least August 2020
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`when Schulman received a letter from the SBPC detailing the chronic failures in the Company’s
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`so-called “world class” compliance regime.
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`14.
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`Instead of fulfilling their duty to disclose all material information or refrain from
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`trading, during the Class Period, Defendants Schulman and Rainey took advantage of PayPal’s
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`artificially inflated stock price by selling nearly $168 million in stock. In particular, Schulman
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`sold over $53 million, and Rainey sold over $20.8 million of PayPal’s common stock after the
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`SBPC Shadow Student Debt Report was released and after they knew about the federal consumer
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`financial law violations detailed herein. These specific stock sales were dramatically out of line
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`with their prior trading activity over a comparable period in the past.
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`B. Regulatory Problems with Interchange Fees, Including the SEC Investigation
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`15.
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`In addition, during the Class Period, Defendants concealed regulatory problems
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`with interchange fees. PayPal issued several debit cards and earned unreasonable and
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`disproportionate interchange fees in violation of Section 1075 of the Electronic Fund Transfer Act
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`of 1978 (“EFTA”) (15 U.S.C. § 1693 et seq.), which was subsequently implemented by the Board
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`of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to a federal
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`regulation on Debit Card Interchange Fees and Routing known as “Regulation II.” Regulation II
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`caps the amount of interchange fees that a financial entity can earn from debit card transactions,
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`but, as fully explained below, PayPal has circumvented or evaded this regulation by using Bancorp
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`as a conduit to keep virtually all the interchange fees for itself, which is, approximately twice the
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`amount allowed pursuant to the regulatory cap. PayPal is either the issuer of the debit cards
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`themselves or, as its own debit card agreements admit, it holds the customer’s account balances,
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`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
`
`
`-6-
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`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 12 of 77
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`both of which mean that neither PayPal nor Bancorp is entitled to claim an exemption from the
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`requirements of Regulation II.
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`16.
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`Throughout the Class Period, PayPal repeatedly acknowledged in filings with the
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`SEC that it was aware of Regulation II and the regulatory cap and misleadingly claimed that the
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`amount of the interchange fee could decrease, and the fees collected may become the subject of
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`regulatory challenge. However, the plain language of both the EFTA and Regulation II and its
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`accompanying commentary from the Federal Reserve make it clear that PayPal is not entitled to
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`an exemption and has set up a shadow banking arrangement to earn unreasonable and
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`disproportionate fees prohibited by federal law. At the very least, Defendants knew or recklessly
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`disregarded the increased risk of regulatory scrutiny and subsequent investigations given the
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`intense focus on this issue from both the industry and regulators over the last decade.
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`C. Investors React Negatively at the News that the Company’s Risk of Regulatory
`Scrutiny Has Materialized
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`17.
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`On October 23, 2020, the Clearing House Association LLC (“Clearing House
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`Association”), a research and analysis organization focused on financial regulation, submitted a
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`public comment to the Federal Reserve outlining how PayPal and other large fintech companies
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`were evading or circumventing the regulatory cap on interchange fees imposed by Regulation II.
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`18.
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`On this partial disclosure or the materialization of the risks thereof, the price of
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`PayPal’s common stock declined by nearly 3% from its closing price of $203.04 that day, to close
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`at $197.22 per share on October 26, 2020, the next trading day.
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`19.
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`On July 29, 2021, Bloomberg News reported that the price of PayPal’s common
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`stock declined that day upon news that the Company faced probes from both the CFPB and the
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`SEC. The article published in Bloomberg News noted that the price of the Company’s common
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`stock continued to fall in late trading in New York after news of the investigations emerged. On
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`the same day, PayPal also filed with the SEC its quarterly report on Form 10-Q for the second
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`quarter of 2021 (“2Q21 10-Q”), in which it provided more details about the investigations. The
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`2Q21 10-Q stated that PayPal had received a Civil Investigative Demand (“CID”) from the CFPB
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`“related to the marketing and use of PayPal Credit in connection with certain merchants that
`
`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
`
`
`-7-
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`

`

`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 13 of 77
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`provide educational services. The CID requested the production of documents, written reports,
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`and answers to written questions.” The 2Q21 10-Q further stated that PayPal had responded to
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`subpoenas and requests for information from the Division of Enforcement at the SEC concerning
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`“whether the interchange rates paid to the bank that issues debit cards bearing our licensed brands
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`were consistent with Regulation II of the Board of Governors of the Federal Reserve System, and
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`the reporting of marketing fees earned from the Company’s branded card program.”
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`20.
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`The market reacted significantly and negatively to the announcement of these
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`investigations. On July 29, 2021, the price of the Company’s common stock declined by over 6%
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`from its previous day closing price of $301.98 to close at $283.17.
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`21.
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`On July 30, 2021, the price of the Company’s common stock declined further by
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`over 2.6% from its previous day closing price of $283.17 to close at $275.53 as the market
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`continued to absorb the news. On July 30, 2021, Coinspeaker, a media outlet dedicated to the
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`fintech industry, also published an article on the SEC investigation and stated that the price of the
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`Company’s stock declined upon the announcement of news of the investigations on the previous
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`day, and continued to decline on the following day as investors absorbed news about the
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`investigations. On July 31, 2021, it declined another 1.6% from its previous day closing price of
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`$275.53 to close at $270.99 on heavy trading volume.
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`22.
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`As a result of the Defendants’ wrongful acts and omissions, and the precipitous
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`decline in the market value of PayPal’s common stock upon the partial disclosures and/or
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`materialization of the concealed risks thereof, Lead Plaintiffs and other Class members have
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`suffered significant losses and damages.
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`JURISDICTION AND VENUE
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`23. The claims asserted herein arise under Sections 10(b) and 20(a) of the Exchange
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`Act (15 U.S.C. §§ 78j(b) and 78t(a)) and SEC Rule 10b-5 promulgated thereunder (17 C.F.R. §
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`240.10b-5).
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`24. This Court has jurisdiction over the subject matter of this Action pursuant to 28
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`U.S.C. § 1331 and Section 27 of the Exchange Act (15 U.S.C. § 78aa).
`
`AMENDED COMPLAINT
`CASE NO.: 21-CV-06468-CRB
`
`
`-8-
`
`
`
`

`

`Case 3:21-cv-06468-CRB Document 49 Filed 01/25/22 Page 14 of 77
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`25. Venue is proper in this District pursuant to Section 27(a) of the Exchange Act (15
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`U.S.C. § 78aa(a)) and 28 U.S.C. § 1391(b) given that a significant portion of the Defendants’
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`misconduct took place within this District. PayPal is a corporation incorporated in Delaware with
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`its principal place of business in San Jose, California, and Defendants Rainey and Schulman reside
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`in or around the San Francisco Bay Area.
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`26.
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`In connection with the acts, conduct and other wrongs alleged in this Amended
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`Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate
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`commerce, including but not limited to, the United States mail, interstate telephone
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`communications and the facilities of a national securities exchange.
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`PARTIES
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`27.

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