For Paragon 28, Unreliable Reporting Leads to Lawsuit

Foot and ankle orthopedic manufacturer Paragon 28 tripped up when it issued financial statements that seriously misled investors about costs and inventory levels. When investors learned the truth about these accounting practices, Paragon shares fell 20% overnight. Some shareholders have now filed a class-action lawsuit against the Company to recoup their losses.

Paragon repeatedly released quarterly financial reports detailing the Company's assets and liabilities. According to that lawsuit, on each of those reports, Paragon executives affirmed that the Company maintained effective control over financial reporting. In reality, investors say, Paragon's executives knew they lacked control over the Company and that as a result, there were major problems in the Company's financial reports, including discrepancies of millions of dollars in costs and inventory.

The truth came out in 2024 when the Company filed a report with the SEC stating that investors should not rely on the Company's previous financial reports because they were fraudulent. Shareholders are now signing up for the lawsuit to recover some of their losses.