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Thomas Przybylowski has spent his career in an unusual position: first defending hedge funds, private equity firms, and publicly traded corporations through complex commercial litigation at Schulte Roth & Zabel, then crossing to Pomerantz LLP, the oldest firm in the world dedicated exclusively to representing defrauded investors, where he litigated securities fraud class actions in federal courts across domestic and international jurisdictions. Few litigators have operated with fluency on both sides of that divide. We spoke with him about what that vantage point reveals.
Q: You’ve represented financial institutions defending against investor claims and then represented the investors bringing those claims. That’s a rare trajectory. What does sitting on both sides actually teach you that you can’t learn from one side alone?
Thomas Przybylowski: It fundamentally changes how you read a case. When you’re defending an institution, you spend enormous energy stress-testing your own disclosures, asking whether a reasonable investor could interpret a statement as misleading even when the intent behind it was entirely defensible. You learn how careful sophisticated actors are about their language, and how much work goes into shaping communications that are technically accurate but strategically crafted.
Then you move to the plaintiff side, and you see how that same careful language looks when the stock has collapsed 40 percent and investors are asking why nobody warned them. The gap between what a company believed it was communicating and what investors understood it to mean is where most securities litigation lives. Having watched that gap form from both directions makes you considerably harder to surprise.
Q: Institutional investors track corporate disclosures closely, but litigation usually arrives as a surprise. What are the patterns in public filings or earnings communications that, in your experience, tend to precede a securities fraud lawsuit?
Thomas Przybylowski: There are a few recurring signals. One is the sudden expansion of risk factor language when a company’s 10-K adds detailed, specific language about risks that weren’t previously disclosed with that level of granularity, it sometimes indicates the company has identified an emerging problem and is trying to establish a paper trail of disclosure before it materializes publicly.
Another is divergence between operational metrics and financial results that management doesn’t explain cleanly. If a company is reporting strong revenue while key operational indicators are quietly deteriorating, and executives aren’t bridging that gap in their commentary, that tension tends to surface later in discovery.
A third pattern is turnover in senior finance roles, CFO departures especially, paired with vague disclosures about the circumstances. Courts have looked at executive departures as circumstantial evidence of what management knew and when. Sophisticated readers of financial filings should treat unexplained changes in disclosure language the way a doctor treats a patient who suddenly changes their story, not as proof of wrongdoing, but as a reason to ask harder questions.
Q: Most investors have only a general sense of how a securities class action actually works. Can you walk through the mechanics of how these cases proceed from the moment a stock drops to a realistic sense of what resolution looks like?
Thomas Przybylowski: The typical sequence begins when a stock drops sharply following a disclosure that contradicts something the company had previously said publicly, a restatement, a regulatory action, a product failure the market didn’t see coming. Plaintiffs’ firms monitor these events and begin investigating almost immediately. A complaint gets filed, often within weeks, making allegations of material misrepresentation under Rule 10b-5.
What most investors don’t appreciate is that a complaint is just the beginning of an extended process. Under the Private Securities Litigation Reform Act, defendants can move to dismiss before discovery begins, and those motions succeed more often than many people expect. If the case survives dismissal, class certification is contested — defendants frequently argue that individual issues predominate over common ones, which can defeat the class mechanism entirely. If a class is certified, most cases settle rather than go to trial.
The realistic outcome for class members is typically a fraction of their calculated losses, the headline settlement number gets divided across thousands of claimants after attorneys’ fees and administrative costs. Investors who hold large enough positions to have real leverage should understand they may have options outside the class structure worth exploring separately.
Q: On the corporate side, what do companies actually do, sometimes without fully understanding the legal consequences, that creates litigation exposure with investors?
Thomas Przybylowski: The most common pattern is what I’d call optimism without qualification. Executives, particularly in growth-stage public companies, make forward-looking statements in earnings calls or investor presentations that reflect genuine belief but lack the hedging language required to provide legal protection.
The PSLRA has safe harbor provisions for forward-looking statements, but they require meaningful cautionary language, and boilerplate warnings that aren’t tailored to specific risks often don’t satisfy courts that are looking at whether those warnings actually alerted investors to the particular risk that materialized.
A second issue is internal communications that contradict public statements. Discovery in securities litigation is extremely broad, and juries and judges read emails. If company executives are privately expressing concern about a metric while simultaneously reassuring investors that the business is on track, that internal record becomes the most powerful tool the plaintiff’s attorneys have. Companies that treat internal communications as purely internal are often surprised to see them in a courtroom.
Q: Your earlier work defending hedge funds and private equity firms gives you a perspective on the disputes that arise inside the fund structure itself such as partnership disagreements, valuation conflicts, questions about fund management. With the 2020–2022 vintage of deals now under real pressure, what are you seeing?
Thomas Przybylowski: The litigation tail from that period is still developing, but the shape of it is becoming clear. Many deals done at peak valuations in 2021 were structured with considerable optimism about exit timelines, performance thresholds, and LP return expectations. When those deals don’t perform, when portfolio companies need additional capital, when exits get pushed or repriced, when distributions don’t materialize on the schedule that was communicated, the documentation governing the fund relationship becomes the battlefield.
LP agreements, side letters, PPMs, and subscription documents that were negotiated quickly in a competitive fundraising environment frequently contain ambiguities that look manageable in a rising market and become serious disputes when performance disappoints. The specific pressure points I’d flag are carry calculations when there are write-downs before exits, key man provisions that didn’t anticipate actual departures, and valuation methodology disputes where GPs and LPs are looking at the same asset and reaching materially different numbers. Those disagreements tend to escalate into formal disputes when an investor wants liquidity that the fund structure can’t provide.
Q: You trained at a firm that represents some of the most sophisticated financial institutions in the world and you now work with individuals and smaller businesses on commercial disputes. What’s the practical difference in how those matters get handled, and what does it mean for someone without institutional resources who finds themselves in litigation?
Thomas Przybylowski: The difference is significant, and it matters in ways that aren’t immediately obvious. Large institutions go into litigation with teams that have handled hundreds of similar matters, outside counsel who specialize in the relevant area, in-house legal departments that understand the process, and the capacity to take a dispute through years of litigation if necessary. That preparation shapes everything: how disputes get documented before they escalate, how communications are managed once a legal issue surfaces, how early decisions get made about whether to fight or resolve.
Individuals and small business owners typically encounter litigation without that infrastructure. They often arrive at a dispute having made decisions in emails, in conversations, in how they’ve structured agreements that are difficult to walk back. The single most valuable thing someone without institutional resources can do is consult counsel early, before a dispute becomes formal, when there is still room to shape the record and assess options. By the time litigation is filed, many of the most consequential decisions have already been made.
Q: Looking forward — where do you see investor litigation and financial disputes heading over the next several years? What patterns are forming now that practitioners should be watching?
Thomas Przybylowski: A few things stand out. The first is the continued expansion of securities litigation in the ESG space. Companies have made sweeping public commitments about environmental practices, supply chain standards, and governance structures, and investors priced those commitments into valuations. As scrutiny of ESG claims intensifies — from regulators, from short sellers, from investigative journalists — the gap between what was stated and what was actually implemented is going to generate litigation. The legal frameworks are still developing, which makes it an active area to watch.
The second is cryptocurrency and digital asset disputes. The regulatory landscape remains unsettled, disclosures have often been inadequate by any traditional standard, and a substantial number of retail investors have suffered significant losses. Courts are still working through basic questions about what legal protections apply and to whom — but the volume of claims is increasing.
The third, which I think is underappreciated, is litigation arising from AI-related disclosures. Public companies are now making material representations about their AI capabilities and strategies. When those representations prove to have been overstated, the same legal frameworks that apply to any material misrepresentation will apply here. That cycle (hype, disappointment, litigation), is a familiar one, and the current environment is following a recognizable path.
Thomas Przybylowski is a NY/NJ litigation attorney with extensive experience leading complex commercial litigation and securities fraud matters.
The post Both Sides of the Table: A Securities Litigator on Fraud Red Flags, Investor Rights, and What’s Coming Next appeared first on The Hype Magazine.
