Illumina San DiegoIllumina is now facing a class action lawsuit from a pair of investors who are accusing the sequencing company of fraud. The pair, Braden van der Wall and Steven Romanoff, allege that Illumina CEO Francis deSouza and CFO Marc Stapley artificially inflated their stock price through misreporting the company’s earnings in the third quarter of 2016. The complaint has been filed with the US District Court of the Southern District of California.

The plaintiffs have filed their suit on behalf of those who bought Illumina stock between 26th July and 10th October 2016 on the basis that the defendants made ‘overwhelmingly positive statements’ about the company’s sales pipeline leading up to and during Q3. Those statements supported a revenue forecast of $625M to $630M for the quarter and increases in earnings per share estimates. Now, Van der Wall and Romanoff claim that those statements violated federal securities laws by suggesting that the company revenue would be substantially higher than it actually was, leading to an ‘immediate and dramatic increase in the price of Illumina’s common stock.’

Further, the plaintiffs are claiming that Illumina failed to adequately inform the general public of material flaws in their internal controls and forecasting processes.

“Prior to and during the third quarter of fiscal 2016, Illumina had been experiencing a material decline in sales of its traditional HiSeq sequencing instrument,” the complaint reads. “The decline in sales, which defendants would later refer to as a ‘trend’ that had been ‘building’ for some time and ‘didn’t show up suddenly’ during the third quarter, went unnoticed during the forecasting process.”

Ultimately, Illumina reported revenues of $607M in the third quarter of 2016 and stated that the shortfall was due to an unexpectedly high year-on-year decrease in sales. In response to the news, the company’s stock price fell almost $46 per share (nearly 25%) in a single day.

If successful, the suit would require the defendants to pay damages sustained by the plaintiffs and class (as a class action lawsuit), award pre- and post-judgement interest to the same parties, and cover any costs involved in the lawsuit. Illumina have not yet commented publicly on the news.