San Francisco 49ers CEO Jed York is facing two insider trading lawsuits related to his role on the board of Chegg, a Santa Clara, Calif.-based so-called “homework help” company that’s been accused of enabling cheating.
According to two shareholders’ lawsuits that were obtained by the San Francisco Chronicle, York, Chegg CEO Dan Rosensweig and several other company executives have been accused of hiding the company’s role in helping students cheat during online exams.
The court documents reportedly allege that York and his colleagues at the online educational support company sold off their Chegg stock at the top of the market without informing investors about the extent to which it provided students with real-time answers to their exams.
York made $1.4 million in profit after selling off 20,000 shares “at artificially inflation prices,” the suit said, according to the SF Chronicle.
“York engaged in insider sales before the fraud was exposed,” one of the lawsuits claims, noting that the 49ers chief — who’s also a board member at Leeds United — has been paid cash stock worth about $2 million for his part-time work with Chegg over the past 10 years.
He has turned a profit of $4.9 million on sales of company stock, records reviewed by the SF Chronicle show.
York and other Chegg executives are now being accused of “gross mismanagement,” “unjust enrichment” and making false and misleading statements in SEC filings in relation to the controversial cheating “schemes” Chegg supposedly profited from.
During the pandemic, when students were increasingly administered tests online, they realized they could utilize Chegg to instantaneously get answers to their exams, the lawsuit claims.
When COVID restrictions eased and students were called back into the classroom, Chegg’s revenues and share price plunged once pupils could no longer blatantly cheat using the site, according to the SF Chronicle, though not before York rid of his shares.
Year-to-date, Chegg’s share price has plummeted nearly 60%, to $10.38 as its struggled to increase revenue from its $19.95-per-month accounts.
Chegg shares soared as pandemic lockdowns kicked in and peaked at $108.78 in February 2021.
By last May, Chegg lost nearly half its value. After reporting dismal Q1 earnings, Rosensweig told investors that profits were down because students were turning to artificial intelligence platforms like ChatGPT for educational services, hindering sign-ups on Chegg.
Rosensweig did not reference the site’s cheating scandal, instead noting that Chegg would be launching its own AI-backed model — CheggMate — that would be supporting by OpenAI’s latest and smartest program, GPT-4.
The shareholders filing the suits asked a judge to overhaul Chegg’s board and force it to comply with securities laws, the SF Chronicle reported.
The documents, which were consolidated in February and are pending in US District Court in Northern California, also requested that Chegg’s directors personally pay restitution and damages.
It’s unclear how much York or Chegg’s other high-ranking executives would be on the hook for if found guilty.
A Chegg’s spokesperson told The Post: “We strongly reject the claims made in securities-related lawsuits against Chegg, including specific allegations against our Board of Directors, which are wholly unfounded. Chegg is actively and resolutely defending against these baseless claims in official court filings.”
The spokesperson added that the site “takes academic integrity very seriously” and “has been helping millions of students learn and thrive for many years, including during the pandemic, creating a transformative digital learning platform to improve outcomes.”
Representatives for the 49ers did not respond to The Post’s request for comment.
York is the nephew of the team’s former owner, real estate magnate Edward DeBartolo Jr., who was forced to step down from the position after 23 years when it was revealed that he would be indicted for gambling fraud.
During DeBartolo’s tenure, the team won five Super Bowls, landing him a spot in the NFL Hall of Fame.
York’s parents then became owners of the 49ers, hiring him as vice president in 2005.
The 43-year-old rose to the team’s chief executive role in 2008, and joined the board of Chegg in 2013.
Since then, Chegg and the 49ers have become intertwined.
In 2019, Chegg tweeted that its “Impact Fund” would donate $500 to first-generation college students every time the 49ers got a first down during a home game.
York retweeted the message, adding: “Love how @Chegg is changing the game in education!”
York is also the general manager of Aurum Partners, a venture capital firm based out of Santa Clara, Calif.
In addition, he serves as the CEO of Forty Niners Suite Co., a company that markets luxury boxes at Levi’s Stadium.
In addition, he’s a director of six nonprofits, including the 49ers Foundation, and serves on the boards of Elevate Sports Ventures, a marketing firm run by 49ers President Al Guido.
This story originally appeared on NYPost
