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The largest initial public offering (“IPO”) to date may have been too good to be true. After raising nearly $21.8 billion in an IPO on the New York Stock Exchange in 2014, Alibaba has been plagued with legal claims that it allegedly defrauded shareholders by concealing a regulator’s warning about its ability to suppress the widespread sale of counterfeit goods on its websites. While the Alibaba Group, the Hangzhou-based group of Internet-based e-commerce businesses, was handed a favorable ruling last year, a U.S. appeals court has overturned the lower court’s decision.

The lawsuit, which was filed by a class of Alibaba shareholders in February 2015, centers on accusations that the e-commerce giant failed to disclose a meeting that took place just two months before its $22 billion IPO. In that July 2014 meeting, China’s State Administration for Industry and Commerce threatened huge monetary fines if Alibaba failed to cut down the int widespread counterfeiting for which its platforms, namely, TaoBao, have become known.

In June 2016, Chief Judge Colleen McMahon of the U.S. District Court for the Southern District of New York held that Alibaba did not fraudulently omit information about the July 2014 meeting. McMahon stated in a lengthy decision that Alibaba’s IPO materials did, in fact, include disclosures of regulatory risks that Alibaba faced for failing to police its websites. Such disclosures, per McMahon, also indicated that China’s legal and regulatory environment made investing in a Chinese company, such as Alibaba, risky.

“It is clear that Alibaba did not downplay its problem with counterfeit sales on its platforms or the likelihood of an administrative action against it,” McMahon wrote.

On Tuesday, however, the U.S. Court of Appeals for the Second Circuit ruled in a 3-0 panel decision that Judge McMahon erred in dismissing the lawsuit. The Second Circuit held that the plaintiff shareholders adequately alleged that Alibaba intended to defraud them. 

As reported by Reuters, the court called the SAIC threat “highly material” to investors because it “required Alibaba to choose between giving up an important source of its revenue or risking enormous fines,” either of which could hurt results or the IPO’s success.

As a result, the case will get a second life before the U.S. District Court for the Southern District of New York. 

* The case is In re: Alibaba Group Holdings Limited Securities Litigation, No. 15-md-02631 (SDNY).