Smart Digital Group Sued Over Alleged Market Manipulation Following Massive Stock Crash
New York, Wednesday, 14 January 2026.
Wolf Haldenstein has filed a class action lawsuit against Smart Digital Group, alleging a social media-driven fraud scheme that precipitated an 86% stock collapse and subsequent SEC trading suspension.
Legal Action Following Market Volatility
Investors in the digital services sector are facing a significant legal development involving Smart Digital Group Limited (NASDAQ: SDM). On January 13, 2026, the law firm Wolf Haldenstein Adler Freeman & Herz LLP filed a class action lawsuit in the United States District Court for the Southern District of New York [1]. This legal action, titled Dixit v Smart Digital Group Limited, is brought on behalf of individuals and entities that acquired SDM securities during the class period extending from May 5, 2025, through September 26, 2025 [1][3]. The lawsuit emerges in the wake of a catastrophic decline in the company’s market value and allegations of serious regulatory non-compliance.
Allegations of a “Pump and Dump” Scheme
The complaint outlines a sophisticated scheme of market manipulation and fraud. According to the filing, the company is accused of participating in a promotional campaign driven by misinformation on social media, where impersonators posing as financial professionals recommended the stock to artificially inflate its price and volume [1][3]. The lawsuit alleges that while this price inflation was occurring, insiders or affiliates utilized offshore or nominee accounts to execute a coordinated dumping of shares [3]. Furthermore, the plaintiffs claim that Smart Digital Group’s public statements during this period were materially misleading because they failed to disclose the risk of fraudulent trading and the potential for regulatory intervention [3].
Regulatory Intervention and Stock Collapse
The financial impact of these alleged activities culminated in a dramatic market event on September 26, 2025. On that day, SDM’s stock price plummeted by 86.4%, closing at just $1.85 per share after NASDAQ halted trading due to extreme volatility [1]. To put this decline in perspective relative to the stock’s peak performance, the drop from its 52-week high of $29.40 [6] to the crash price of $1.85 represents a staggering decrease of -93.707%. Following this crash, the Securities and Exchange Commission (SEC) suspended trading in SDM securities from September 29, 2025, through October 10, 2025, citing concerns over “potential manipulation” [1]. Subsequently, NASDAQ suspended trading on October 11, 2025, pending the receipt of additional information, and shares remain halted as of the filing [1].
Corporate Restructuring Amidst Legal Challenges
In a notable development occurring just one day prior to the lawsuit announcement, Smart Digital Group Limited significantly altered its corporate structure. On January 12, 2026, the company filed a report indicating it had centralized its administrative and management functions in Zhuhai City, Guangdong Province, China [7]. This move effectively designated the Zhuhai location as its principal executive office, ending the role of its Singapore office as a main hub [7]. This shift in operations comes at a critical time as the company faces scrutiny regarding its business practices and the true nature of its trading activity [3].
Timelines for Affected Investors
For shareholders who incurred losses during the defined class period, strict legal deadlines are now in effect. Investors wishing to serve as the lead plaintiff in this class action must file a motion with the Court no later than March 16, 2026 [1]. The outcome of this litigation could have substantial implications for the recovery of lost capital for those invested in Smart Digital Group, particularly given the severity of the alleged securities violations and the continued suspension of the stock on major exchanges [1][3].