Berger & Montague, P.C. Named Lead Counsel in Manipulative Dividend Options Trading Class Action Lawsuit
PHILADELPHIA, June 24, 2015 /PRNewswire/ -- Lawrence Deutsch and Robin Switzenbaum of the law firm Berger & Montague, P.C. have been appointed co-lead counsel (along with the law firm of Bragar Eagel and Squire, P.C.) in the dividend options market manipulation class action lawsuit, Stephen Rabin v. John Doe Market Makers, NASDAQ OMX PHLX LLC, and NASDAQ OMX GROUP, INC. The class action has been filed in the U.S. District Court for the Eastern District of Pennsylvania on behalf of all persons who held short call option positions on "in the money" call options contracts on dividend paying stocks and exchange traded funds ("ETFs") and who were adversely affected by Defendants' manipulation of the options markets prior to the ex-dividend date on such securities from February 6, 2010 through the present (the "Class Period").
The lawsuit alleges widespread manipulation of call options on the Philadelphia exchange by market makers and brokers on dividend paying stocks and exchanged traded funds over several years. A market maker is a broker-dealer, who enjoys certain margin and trading privileges because of their status, that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. It is alleged that the market makers used these privileges to unfairly manipulate certain options trades. The case is brought on behalf of writers of call options for dividend paying stocks and ETFs that were damaged by the scheme.
Prior to this announcement, the Court had previously granted extraordinary discovery to co-lead counsel in order to properly identify the participants in this scheme, who originally had to be pled as John Doe defendants since their identities could not be determined from public sources. Although the Private Securities Litigation Reform Act of 1994 normally bars any discovery until after motions to dismiss are resolved, nonetheless, the judge granted plaintiff counsel's motion for expedited discovery to identify the participants in this scheme from the records of NASDAQ.
Persons who may have held short call positions or wish to discuss this action may visit www.bergermontague.com/manipulativeoptions or contact Lawrence Deutsch, Esq. of Berger & Montague, P.C., at 1-215-875-3062 or [email protected].
Background on the Dividend Call Options Manipulation
The Complaint alleges that beginning in February 2010, Market Maker Defendants manipulated call options in advance of dividend payments on underlying securities to the detriment of all other holders of short call positions in those options contracts. Specifically, the Market Maker Defendants, with the acquiescence of Defendants NASDAQ/PHLX and NASDAQ OMX, manipulated the options contracts by executing among themselves huge pre-arranged matched options trades on underlying securities immediately prior to the date for that security's dividend payment.
These market makers flooded the options market with additional option contracts one day before the ex-dividend date. By greatly inflating the size of the open interest pool for the call options, the Market Maker Defendants, with the acquiescence of NASDAQ/PHLX and NASDQ OMX, increased their own chances of non-assignment of the options, thus increasing their chances to collect the dividend on those unassigned options. Market Maker Defendants thereby improperly diverted the dividends that would have been paid to plaintiff and other members of the class, resulting in damages to the class.
SOURCE Berger & Montague, P.C.
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