According to the complaint, throughout the Class Period defendants issued public statements which they knew or recklessly disregarded were materially false and misleading I and failed to fully disclose material adverse facts concerning Fremont General's business, operations and prospects. Specifically, throughout the Class Period defendants failed to fully disclose that the Company engaged in a variety of risky and improper mortgage lending practices, thereby causing Fremont General securities to trade at artificially inflated prices during the Class Period. On March 2, 2007, the Company announced that Fremont General, Fremont Investment & Loan, and Fremont General Credit Corporation would enter into a voluntary cease and desist order with the Federal Deposit Insurance Corporation (FDIC) related to allegations of unsafe or unsound banking practices in the Company's subprime mortgage lending business. On April 2, 2007, the Company announced that its auditor, Grant Thornton LLP, had resigned from its position as the Company’s independent accounting firm. Approximately two weeks later, on April 16, 2007, Fremont General announced an agreement to sell approximately $2.9 billion of its subprime residential real estate loans and that the Company was negotiating terms for the sale of most of its residential real estate business and assets. One month later, on May 22, 2007 Fremont General announced definitive agreements for the sale of its commercial real estate lending business, the sale of a minority interest in the Company and the appointment of new senior management. The true facts, the full extent of which were known by the defendants but concealed from the investing public during the Class Period, were that Fremont General and its wholly owned banking subsidiary Fremont Investment & Loan (FIL) engaged in widespread, unfair and/or deceptive banking practices, which enabled the Company to grant adjustable-rate mortgages to subprime borrowers who were highly unlikely to be able to repay the loans and thus were at great risk of default and foreclosure. Then, on August 10, 2007, Fremont General filed a Form NT 10-Q with the Securities and Exchange Commission (SEC), announcing a delay in the filing of the Company's Form 10-Q for the period ended June 30, 2007, and noting that "[t]he Company has not yet filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2006 or its Quarterly Report on Form 10-Q for the quarter ended March 31, 2007" and that the Company "expects to report a significant change in results of operations from the corresponding period for the last fiscal year." This news shocked the market, causing the price of Fremont General Preferred Shares to sharply decline, beginning on the next trading day, Monday, August 13, 2007, and continuing over the subsequent three days, to close on August 16, 2007 at 12.00 per share - a four-day drop of nearly 30%, or $4.45 per share. As a result of defendants' misleading statements and failures to fully disclose the Company's risky and improper mortgage lending practices and their effects on its business and prospects, Fremont General securities traded at artificially inflated prices during the Class Period, thereby damaging investors.

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