Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading

October 4, 2023

A judge now finds that broker-dealers may be liable for illegal trading according to a report published by Warshaw Burstein.

Warshaw Burstein, LLP, a full-service law firm in New York City, announced on Monday that on September 29, 2023, Federal District Court Judge Lorna Schofield of the Southern District of New York issued an Opinion and Order in Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc. et.al that “will reverberate through the compliance departments of every brokerage firm on Wall Street.”

In her decision, which denied the defendants’ motion to dismiss Harrington’s market manipulation claims of spoofing, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges, and have a “continuing responsibility to ensure that their customer’s order flow … is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm.”

“In their motion, the defendants unsuccessfully argued that they are not responsible for what they characterize as “their customers’ trading” — and accordingly cannot be held liable for unlawful trading that they carry out on behalf of customers.

The Court categorically rejected the defendants’ argument and held that where a broker-dealer fails to monitor its customers’ trading and is “reckless in not knowing that the trades being executed at their customers’ direction were manipulative” the broker can be held primarily liable,” the report said.

“Warshaw Burstein and the Christian Attar law group, working together over the past 22 years, have successfully prosecuted and collected millions of dollars in damages on behalf of their clients from broker-dealers, market-makers, hedge funds, and asset-based lenders who have engaged in market manipulation schemes.”

Wes Christian Says ‘Naked Shorting’ is a Big Worldwide Problem

Famous lawyer known for fighting against market injustices Wes Christian says ‘Naked Shorting’ is a big worldwide problem.

Wes Christian was mentioned by Forbes who painted the 40-year-experienced attorney as a conspiracy theorist threatening Wall Street.

“Naked short-selling is a thing. Actually, it really isn’t. But that hasn’t stopped a group of hucksters, led by a cynical lawyer, from conjuring an excuse for meme-stock collapses — and creating a community now talking up violence against anyone in their way,” said Forbes staff member Brandon Kochkodin.

Wes says mainstream media will continue to ridicule those standing against fraud in the market but that investors should continue to raise awareness.

The Securities and Exchange Commission (SEC) announced in mid June that it charged investment adviser Sabby Management LLC and its managing partner, Hal D. Mintz in the latest naked shorting scheme.

The partners generated more than $2 million in illegal profits from what the regulator claims were in connection with a long running scheme involving misrepresentations and violations of rules for short selling and order making, as well as other violative trading.

Just last month Citadel Securities was charged for manipulating the markets, a deep concern retail investors have been alleging for years now.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

Will Warshaw Burstein be able to bring light to Wall Street crime and help shape the future of market regulation?

Leave your thoughts below.

Also Read: “The Game is Rigged”, Says Ex-Citadel Data Scientist

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