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Defunct e-tailer eToys became the latest company that will have to face off against
shareholders in court, as investors filed a class action lawsuit alleging that the former
online toy seller's initial public offering (IPO) prospectus was "materially false and
Specifically, the suit charges that a portion of the e-tailer's IPO registration
statement, which was filed with the U.S. Securities and Exchange Commission (SEC), did not disclose that
Goldman Sachs, Robertson Stephens and Merrill Lynch had "solicited and received
excessive and undisclosed" commissions from certain investors.
In exchange for these commissions, the action said, the investment firms
allocated to their customers "material portions" of the restricted number
of eToys IPO shares.