Kasowitz Defeats Defendants’ Motion to Dismiss its Market Manipulation Lawsuit on Behalf of Mullen Automotive

Kasowitz Benson Torres, on behalf of electric vehicle (EV) manufacturer Mullen Automotive Inc., defeated IMC Financial Markets, Clear Street Markets LLC, and UBS Securities’ motion to dismiss its market manipulation lawsuit.  In the lawsuit, which is pending in the United States District Court for the Southern District of New York, Mullen alleges that, for over two years, Defendants used high-frequency algorithmic trading to manipulate and spoof Mullen’s publicly traded shares in violation of Section 10(b), Rule 10b-5(a) and (c), and Section 9(a) of the Securities Exchange Act of 1934, as well as New York common law fraud. 
 
As detailed in the complaint, spoofing is an insidious form of market manipulation to inflate or deflate the price of a security artificially through the strategic placement and cancellation of thousands of orders.  With “Baiting Orders,” for example, spoofers place sell orders meant to create a false signal that a company’s share price is trending downward, tricking other market participants into entering their own orders to sell.  The spoofers then execute buy orders—now at artificially low prices—and promptly cancel their Baiting Orders.  This type of conduct undermines the transparency and integrity of the markets by distorting the true nature of supply and demand. 
 
In denying the motion in its entirety, the Court held, among other things, that “Defendants placed and then cancelled a high volume of Baiting Orders within seconds and even milliseconds, repeating this pattern thousands of times, often with multiple episodes per trading day.”  In turn, the Court determined that the complaint “outlines Defendants’ efforts to artificially depress the price of Mullen securities and the subsequent effects on the market.”
 
The Kasowitz Benson Torres team representing Mullen is led by partners Stephen W. Tountas and Andrew L. Schwartz, and includes associates William Wolfe Taub and Daniel M. Furey.