Mullen Sues Schwab, TD Ameritrade for Fictitious Short Selling
Mullen, a small-cap stock trading firm, has filed a lawsuit against Charles Schwab Corp. and TD Ameritrade Holding Corp. for allegedly engaging in fictitious short selling. The lawsuit, filed in the U.S. District Court for the Southern District of New York, claims that the two companies have been manipulating the market by engaging in a practice known as “naked short selling.”
What is Naked Short Selling?
Naked short selling is a form of stock market manipulation in which traders sell shares of a stock without actually owning them. This practice is illegal in the United States, as it can artificially depress the price of a stock and create a false impression of market demand.
Mullen’s Allegations
Mullen alleges that Schwab and TD Ameritrade have been engaging in naked short selling of its stock since at least 2018. The lawsuit claims that the two companies have been selling shares of Mullen’s stock without actually owning them, and that this has caused the price of the stock to drop significantly.
Mullen also claims that Schwab and TD Ameritrade have been engaging in other manipulative practices, such as “spoofing” and “marking the close.” Spoofing is a practice in which traders place orders with the intention of canceling them before they are executed, in order to create a false impression of market demand. Marking the close is a practice in which traders place orders at the end of the trading day in order to influence the closing price of a stock.
Mullen’s Request for Relief
Mullen is seeking unspecified damages and an injunction to prevent Schwab and TD Ameritrade from engaging in further manipulative practices. The lawsuit also seeks to have the two companies disgorge any profits they have made from their alleged activities.
Schwab and TD Ameritrade’s Response
Schwab and TD Ameritrade have both denied the allegations and have stated that they have not engaged in any manipulative practices. They have also stated that they are committed to providing a fair and transparent marketplace for all investors.
Implications of the Lawsuit
The lawsuit has the potential to have far-reaching implications for the stock market. If Mullen is successful in its lawsuit, it could set a precedent for other companies to take legal action against manipulative practices. It could also lead to increased scrutiny of the practices of large brokerages, such as Schwab and TD Ameritrade.
The Future of the Lawsuit
The lawsuit is still in its early stages, and it is unclear how it will ultimately be resolved. It is possible that the two companies will reach a settlement, or that the case will go to trial. Regardless of the outcome, the lawsuit is likely to have a significant impact on the stock market and the practices of large brokerages.