Securities Litigation Partner James (Josh) Wilson Encourages Investors Who Suffered Losses Exceeding $100,000 In Arqit To Contact Him Directly To Discuss Their Options
NEW YORK, NY - (NewMediaWire) - May 09, 2022 - Faruqi & Faruqi, LLP, a leading national securities law firm, is investigating potential claims against Arqit Quantum Inc. (“Arqit” or the “Company”) (NASDAQ: ARQQ, ARQQW) and reminds investors of the July 5, 2022 deadline to seek the role of lead plaintiff in a federal securities class action that has been filed against the Company.
If you (i) suffered losses exceeding $100,000 investing in Arqit stock or options between September 7, 2021 and April 18, 2022, and/or (ii) were a holder of Centricus securities as of the record date for the special meeting of shareholders held on August 31, 2021 to consider approval of the merger between Arqit and Centricus (the “Merger”) and would like to discuss your legal rights, Faruqi & Faruqi partner Josh Wilson directly at 877-247-4292 or 212-983-9330 (Ext. 1310). You may also click here for additional information: www.faruqilaw.com/ARQQ.
There is no cost or obligation to you.
As detailed below, the lawsuit focuses on whether the Company and its executives violated federal securities laws by making false and/or misleading statements and/or failing to disclose that: (1) Arqit’s proposed encryption technology would require widespread adoption of new protocols and standards of for telecommunications; (2) British cybersecurity officials questioned the viability of Arqit’s proposed encryption technology in a meeting in 2020; (3) the British government was not an Arqit customer but, rather, providing grants to Arqit; (4) Arqit had little more than an early-stage prototype of its encryption system at the time of the Merger; and (5) as a result, Defendants’ statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.
On April 18, 2022, The Wall Street Journal (the “WSJ”) published an article titled, “British Encryption Startup Arqit Overstates Its Prospects, Former Staff and Others Say.” The WSJ article stated, in relevant part:
When the company secured its Nasdaq listing last autumn, its revenue consisted of a handful of government grants and small research contracts, and its signature product was an early-stage prototype unable to encrypt anything in practical use, according to [former employees and other people familiar with the company]. The encryption technology the company hinges on—a system to protect against next-generation quantum computers—might never apply beyond niche uses, numerous people inside and outside the company warned, unless there were a major overhaul of internet protocols.
British cybersecurity officials questioned the viability of Arqit’s proposed approach to encryption technology in a high-level evaluation they privately shared with the company in the summer of 2020, according to people familiar with the matter.
The U.S. National Security Agency and the NCSC published separate assessments in recent years warning against using satellite-based encryption systems like those Arqit is proposing to integrate into its current product in the next few years. The NSA said its warning was unrelated to any specific vendor, a spokesperson said.
The encryption system—with or without its satellite components—depends on the broad adoption of new protocols and standards for telecommunications, cloud computing and internet services that currently aren’t widely supported, people familiar with the matter said.
Steve Weis, a San Francisco-based cryptographer and entrepreneur, said that what Arqit was proposing—relying in part on transmitting quantum information from satellites—is a well-known 1980s-era technology with limited real-world application. “There have been many proofs of concept and companies trying to sell products,” he said. “The issue is that there is no practical-use case.”
Key to the company’s pitch was its claim that it had a large stream of future revenue locked in as the product was live and already selling well. “Customers are using the Arqit products today—and they are universally finding it to be an important part of their technology future,” Mr. Williams said in an August investor presentation shortly before the merger closed. He added, “The Quantum Cloud product is live for service and we already have $130 million in signed committed revenue contracts.”
“These are contracts where the revenues will definitely be delivered,” the CEO said.
The people familiar with the matter said that the bulk of the company’s committed revenue isn’t from selling its product and that at its public launch, the company had little more than an early-stage prototype of its encryption system. Several clients the company lists—including a number of British government agencies—are simply giving Arqit research grants, nonbinding memorandums of understanding or research agreements that come with no funding, not contracts for its encryption product, they said.
No commercial customer was using Arqit’s encryption system with live data when it made its market debut in September, the people said, and the system couldn’t meaningfully use any of the common internet protocols required to do nearly anything online. They said it has signed two master distribution agreements with BT Group  PLC and Sumitomo Corp.  for the still-unrealized satellite component of its technology that are cancelable under certain conditions.
On this news, Arqit share price fell $2.57 per share, or 17%, to close at $12.49 per share on April 18, 2022, damaging investors.
The court-appointed lead plaintiff is the investor with the largest financial interest in the relief sought by the class who is adequate and typical of class members who directs and oversees the litigation on behalf of the putative class. Any member of the putative class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Your ability to share in any recovery is not affected by the decision to serve as a lead plaintiff or not.
Faruqi & Faruqi, LLP also encourages anyone with information regarding Arqit’s conduct to contact the firm, including whistleblowers, former employees, shareholders and others.
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