Billionaire Richard Branson to face lawsuit in US court amid fraud allegations over Virgin Galactic

On Monday, a United States district judge said that the British billionaire entrepreneur Richard Branson must face a lawsuit filed by the shareholders of Virgin Galactic who have alleged that he withheld information regarding issues faced by the company’s spaceship programme. Furthermore, Branson is also accused of selling hundreds of millions of dollars worth of stock at inflated prices.

This comes after the US District Judge Allyne Ross in Brooklyn, New York, dismissed most claims in the proposed class action, however, the shareholders could attempt to prove that Virgin and Branson defrauded them into overpaying for the space tourism company’s shares, said a report by Reuters.

The aforementioned shares are now trading more than 90 per cent lower than their peak in February last year. In a 55-page decision, Ross said that the shareholders can sue for approximately $301 million of stock which was sold one month after the flight in 2021.

This was in the context of Branson’s statement in July last year, in which he claimed that his flight on the rocket Unity, in which the British entrepreneur soared 80.47 kilometres above the earth, was “flawless”. On the contrary, reports show that Unity had strayed from its assigned airspace. Therefore, Branson might be asked to defend these remarks in court.

Furthermore, shareholders can also sue the founder of the Virgin group over his statements made in July 2019 which claimed that the company oversold their “great progress” in overcoming “hurdles” to commercial spaceflight. The test flight of Unity, five months prior, was a near disaster and suffered critical damage.

According to Forbes magazine, the 72-year-old Branson is worth $3.7 billion. The British entrepreneur's California-based company Virgin went public in October 2019 after a merger with a special purpose acquisition vehicle, Social Capital.

The lawsuit filed in the US district court, eastern district of New York includes shareholders who owned the stock of either of the companies from July 10, 2019, to October 14, 2021. This period also marks the time when Virgin had grounded Unity, delaying its bid on commercial space travel which led its share prices to fall by 16.8% the following day.

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