Peloton, Board Settle Insider Trading Cases on Treadmill Safety

Peloton Interactive Corp. and its senior leaders have an agreement in principle to end litigation over their alleged scheme to pocket millions in insider trading profits at prices inflated by the company’s pandemic-era boom while concealing catastrophic safety problems.

Peloton and its top brass said in court filings that they’re finalizing a global settlement to resolve a trio of parallel shareholder cases targeting their stock sales and statements about its treadmills. The company—best known for its flagship stationary bike—saw its fortunes soar after the Covid-19 outbreak shuttered gyms worldwide, forcing people to work out at home.

The three lawsuits, filed in 2021 and 2022, stemmed from dozens of injury reports involving the Tread+, which allegedly suffered from dangerous design flaws that gave it a tendency to trap and drag children and pets. At least one child died in a Tread+ accident. The suits said Peloton’s top brass downplayed the problems while selling nearly $500 million worth of stock based on inside information that a recall was virtually inevitable.

The cases are pending in Delaware’s Chancery Court, the US District Court for the District of Delaware, and the US District Court for the Eastern District of New York. They involve shareholder derivative claims, which are technically filed on a corporation’s behalf against its leaders. Damages in derivative cases are typically paid into a company’s coffers by its officers, its directors, or their insurers.

The tentative accord was first disclosed Sept. 30, the day a federal judge in Manhattan dismissed a separate securities fraud lawsuit that said Peloton insiders sold hundreds of millions of dollars worth of stock while falsely hyping the sustainability of its explosive growth during the pandemic. Another case pending in Delaware involves similar allegations.

The settlement in principle was originally reached in late August, according to one of the court filings.

The cases are In re Peloton Interactive Inc. Deriv. Litig., E.D.N.Y., No. 1:21-cv-2862, letter filed 9/30/24, In re Peloton Interactive Inc. S’holder Deriv. Litig., Del. Ch., No. 2022-1051, letter filed 10/1/24, and Blackburn v. Peloton Interactive Inc., D. Del., No. 22-cv-1618.