SAN JOSE, CA – September 19, 2026 (STL.News) PayPal Holdings Inc. (Ticker: PYPL) is facing a new investigation into the conduct of its officers and directors as litigation surrounding the payment company’s Branded Checkout business continues to expand, adding another layer of scrutiny following a sharp deterioration in investor expectations earlier this year.
Kahn Swick & Foti LLC, or KSF, announced Friday that it has opened an investigation into PYPL’s officers and directors to determine whether they breached fiduciary duties owed to shareholders or violated state or federal laws.
The investigation does not mean KSF has filed a lawsuit or that it has established wrongdoing. However, it comes as PYPL already faces a consolidated federal securities class action and multiple shareholder derivative lawsuits arising from substantially the same underlying events.
PYPL’s own filings with the Securities and Exchange Commission show that five derivative actions have been filed, four of which have been consolidated in federal court in California.
The growing legal proceedings center primarily on statements about PYPL’s Branded Checkout business and whether investors received an overly optimistic picture of its growth prospects before the company’s disappointing February financial report and leadership shakeup.
KSF opens investigation into PayPal leadership
KSF announced its investigation Sept. 18, saying it is examining whether PYPL’s officers and directors breached fiduciary duties to shareholders or otherwise violated applicable laws.
The law firm pointed to positive statements PYPL made during 2025 concerning initiatives intended to drive Branded Checkout growth in the United States and internationally.
KSF’s announcement then points to Feb. 3, 2026, when PYPL reported fourth-quarter and full-year 2025 results, disclosed weaker Branded Checkout performance, and announced a change in company leadership.
The KSF investigation should not be confused with a securities class-action lawsuit. KSF did not announce a new lawsuit on Friday, and an investigation by a plaintiffs’ law firm does not establish that PayPal or its executives violated the law.
Instead, the investigation could determine whether KSF believes it has grounds for additional shareholder litigation.
That distinction is particularly important because PayPal is already defending both securities litigation brought on behalf of investors and derivative litigation brought nominally on behalf of the company.
Federal securities litigation has advanced
The primary securities case is In re PayPal Branded Checkout Securities Litigation, Case No. 3:26-cv-01589-JSC, pending in the U.S. District Court for the Northern District of California before U.S. District Judge Jacqueline Scott Corley.
The litigation began Feb. 24 when investor Timothy E. Darcy filed a proposed securities class action against PayPal and several current and former executives.
That original case sought to represent investors who acquired PayPal common stock between Feb. 25, 2025, and Feb. 2, 2026.
A second lawsuit filed April 2 by Norfolk County Retirement System alleged substantially similar securities violations but proposed a considerably longer class period extending from Feb. 8, 2024, through Feb. 2, 2026.
Judge Corley consolidated the cases on May 21 under the title In re PayPal Branded Checkout Securities Litigation.
The court appointed a group of pension funds as lead plaintiffs and named Labaton Keller Sucharow LLP and Pomerantz LLP as co-lead counsel.
The litigation has since progressed.
On Aug. 10, the lead plaintiffs filed an amended complaint naming PayPal, former CEO James Alexander Chriss, Jamie Miller, Frank Keller and Suzan Kereere as defendants. The court docket shows that the court issued a summons for Kereere on Aug. 11.
The allegations have not been adjudicated, and the lawsuits do not establish that PayPal or any individual defendant committed securities fraud.
PayPal describes allegations in SEC filing
PayPal provided its own description of the litigation in its Form 10-Q filed with the SEC on July 28.
According to the company, the securities action alleges that public statements made during the disputed period were materially false or misleading because defendants allegedly failed to disclose impediments affecting PayPal’s Branded Checkout growth strategy and its ability to meet previously announced 2027 financial targets.
Those remain plaintiffs’ allegations.
PayPal’s SEC disclosure provides another important piece of the story: the securities class action is only one part of the litigation stemming from the controversy.
Five derivative lawsuits followed
Between March and June, shareholders filed five derivative lawsuits involving PayPal.
They include:
- Goncalves v. Chriss et al., filed March 11 in the Northern District of California.
- LR Trust v. Chriss et al., filed May 6 in the Northern District of California.
- Stan v. Chriss et al., filed May 11 in the Northern District of California.
- Lovoi v. Adkins et al., filed May 17 in the Northern District of California.
- Haliburton v. Chriss et al., filed June 3 in the U.S. District Court for the District of Delaware.
PayPal disclosed that the derivative cases are based on the same alleged facts and circumstances underlying the Branded Checkout securities litigation.
The cases name certain current and former PayPal officers and members of the company’s board as defendants.
According to PayPal’s SEC filing, the derivative plaintiffs have asserted claims including breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement, abuse of control, insider trading, contribution, and alleged violations of the Securities Exchange Act.
The remedies sought include damages on behalf of PayPal and changes to the company’s corporate governance and internal procedures.
On July 10, the Goncalves, LR Trust, Stan and Lovoi cases were consolidated in California as In re PayPal Holdings, Inc. Stockholder Derivative Litigation, Case No. 3:26-cv-02145.
PayPal also disclosed an important procedural development: the derivative actions have been stayed pending further developments in the securities action.
That makes the existing securities case particularly important because its progress could affect several related shareholder proceedings.
February results triggered investor fallout
The controversy largely came to a head Feb. 3 when PayPal reported fourth-quarter and full-year 2025 results.
The results exposed weaker-than-expected performance in Branded Checkout, one of the company’s strategically important businesses.
At roughly the same time, PayPal underwent a major leadership change.
Former CEO Alex Chriss left the company, and Enrique Lores was subsequently installed as president and chief executive officer.
The February developments were particularly significant because PayPal had spent considerable time trying to persuade investors that initiatives across its payments ecosystem could restore stronger, more profitable growth.
Instead, the weaker Branded Checkout performance intensified questions about the pace of the company’s turnaround.
That disconnect between earlier expectations and subsequent performance lies at the heart of plaintiffs’ securities allegations.
The plaintiffs contend that investors bought PayPal stock at artificially inflated prices because PayPal failed to adequately disclose material obstacles to its Branded Checkout growth strategy.
PayPal has not been found liable for those allegations.
PayPal’s business has shown signs of stabilization
The legal controversy is only one side of PayPal’s current situation.
More recent operating results indicate that management believes progress is being made under Lores.
PayPal reported second-quarter net revenue of approximately $8.7 billion, representing growth of 5% on a reported basis and 3% on a currency-neutral basis.
Lores said in announcing the July results that he was encouraged by the company’s progress and that PayPal had moved quickly to refine its transformation strategy.
Significantly, Lores said Branded Checkout had “further stabilized.”
PayPal also raised its full-year non-GAAP guidance, citing its execution and confidence in the business’s direction.
Those developments provide an important counterpoint to the allegations underlying the lawsuits.
The litigation principally concerns statements and events preceding the February disclosure, while PayPal’s July results suggest management believes the company has since made progress addressing its operational problems.
Whether that improvement continues will likely remain closely watched by shareholders.
Two different types of shareholder cases
The distinction between the pending securities litigation and derivative litigation is significant.
The securities class action generally seeks to recover damages for investors who contend they bought PayPal shares at prices affected by allegedly misleading statements or omissions.
Derivative litigation is different.
Shareholders filing derivative claims generally act on behalf of the corporation, alleging that officers or directors harmed the company through breaches of duty or other misconduct.
Any recovery in a successful derivative case generally belongs primarily to the corporation rather than directly compensating shareholders for investment losses.
KSF’s newly announced investigation appears more closely related to this second category because the firm specifically says it is examining the conduct of PayPal’s officers and directors.
However, KSF has announced only an investigation at this stage.
PayPal litigation enters another phase
The latest KSF investigation adds to a complicated legal backdrop for one of the world’s largest digital payments companies.
PayPal is now dealing with a consolidated securities class action alleging misleading statements concerning Branded Checkout, four consolidated shareholder derivative cases in California, another derivative proceeding filed in Delaware and a newly announced investigation by Kahn Swick & Foti.
At the same time, the company is attempting to demonstrate that its underlying business is improving.
PayPal’s July financial results offered evidence of stabilization, including revenue growth, increased full-year guidance and management’s assertion that Branded Checkout performance has improved.
The ultimate outcome of the shareholder litigation remains uncertain.
The allegations contained in the securities and derivative complaints have not resulted in a court finding that PayPal, its directors or its executives committed securities fraud, breached their fiduciary duties or engaged in other wrongdoing.
The KSF investigation announced Sept. 18 likewise represents an inquiry by a private law firm rather than a government enforcement action or judicial finding.
For investors, however, the latest investigation shows that the legal consequences of PayPal’s difficult transition earlier this year continue to develop even as its new leadership works to stabilize the business.
Disclosure: This article reports on securities litigation and related corporate developments for informational purposes only. It is not investment, financial, or legal advice. Allegations in civil complaints are allegations only and have not been proven in court. No court ruling establishing wrongdoing by PayPal or the individual defendants discussed in this article was identified in the records reviewed for this report.
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