TD Ameritrade Lawsuit _ Gurfein v. Ameritrade _ False Realtime Quotes
Plaintiff Hadassah Gurfein is a private investor who maintained an account with Ameritrade. On December 6, 2002 Gurfein attempted to sell Forest Labs options contracts through Ameritrade. At 8:53:34 A.M. (CST) Gurfein placed an order to sell 50 Forest Labs December 100 put contracts at $7.70. The “bid” price displayed on Gurfein’s monitor at the time she prepared to place her order was $7.70, but increased to $7.80 as she placed her sell order. By 8:56:21 A.M. the order had not been executed, and Gurfein cancelled it. She attempted several more times to sell her puts, each time offering a price at or below the electronically displayed bid, and each time the order was not executed instantaneously and was cancelled by Gurfein. In order to “salvage a rapidly decreasing unrealized gain,” Gurfein exercised her 50 Forest Labs December 100 put contracts by purchasing 5,000 common shares of Forest Labs, which she then immediately sold for an overall profit of approximately $20,500. Amended Cmplt. ¶ 110. Gurfein alleges that she suffered a loss of approximately $13,500, the difference 420*420 between the profit she would have realized if her first trade had been executed at $7.70 ($34,000) and the $20,500 profit she actually obtained.
The same day, Gurfein tried to sell 100 Forest Labs February 85 puts through Ameritrade. She submitted an order to sell all 100 contracts at $4.50, a price below the electronically displayed bid. Only 25 of the contracts were sold, and at a price of only $3.00. The remaining 75 contracts were subject to a 2-for-1 split in January 2003 and ultimately sold at a price of $.20 each, for a total of $3,000. Gurfein alleges a total loss of $34,500 on this transaction, reflecting the difference between what she would have made if all 100 options had been sold at $4.50 ($45,000) and the $10,500 she actually made. Gurfein attributed the quotations on her computer throughout her December 6th trading activity to both “defendant Knight” and Ameritrade.
Gurfein claims that those transactions, coupled with the findings in the OCIE Report, show repeated misrepresentations and a scheme by defendants to defraud the options market through illegal trading. She alleges that defendants materially misrepresented both bid and ask quotations, and that orders placed by direct access customers would be executed instantaneously. As part of the scheme (1) Ameritrade intentionally routed its customers’ orders to Knight, and defendants (2) refused to execute direct access orders at the quoted prices, (3) discriminated against direct access customers by not executing their orders, or executing them at less favorable prices than those given to preferred customers, (4) changed or “faded” options quotations after plaintiff clicked on them, and (5) the AMEX ignored the violations and allowed the scheme to continue. As a result, defendants reaped profits, while plaintiff lost profits and suffered losses. Amended Cmplt. ¶¶ 112 and 123.c.
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