Stock traders appeal from Court order in favour of Apex Clearing in short squeeze lawsuit
Stock traders have filed an appeal from a District Court order in favour of Apex Clearing in a short squeeze lawsuit.
On February 6, 2023, plaintiffs Peter Jang and Erik Chavez, on behalf of themselves and others similarly situated, informed the Florida Southern District Court that they appeal to the United States Court of Appeals for the Eleventh Circuit from the final Order entered on January 9, 2023, which granted Defendant Apex Clearing Corporation’s Motion to Dismiss, and dismissed Plaintiffs’ Amended Consolidated Class Action Complaint with prejudice.
The complaint against Apex Clearing forms part of a multi-district litigation which also targets Robinhood.
The traders who brought this lawsuit insist that securities brokers have a duty to act in good faith and in the best interest of their customers. The traders argue that on January 28, 2021, Apex Clearing Corporation violated its fundamental, well-established duties by taking unprecedented action. It prevented its customers from buying certain highly liquid, in-demand stocks for approximately 3-1/2 hours for their own financial self-interest and to the financial detriment of their customers.
The plaintiffs argue that this Market Suspension was designed to and did cause Apex’s own customers to lose money on the very same stocks that Apex had previously sold to those customers.
Plaintiffs brought four claims against Apex. For all counts, they seek “compensatory damages, punitive damages, restitution, and/or refund of all funds acquired by Defendant from Plaintiffs and the proposed members of the Classes as a result of Defendant’s negligence and unlawful actions.”
On January 9, 2023, the District Court concluded that the Plaintiffs’ four claims failed as a matter of law. Counts I and II each fail to allege a duty that Defendant — a clearing broker — owed to Plaintiffs. Count III asks the Court to imply a restriction on Defendant’s contractual right to refuse to execute trades that is inconsistent with the Customer Agreement Plaintiffs signed. And Count IV fails to allege that Defendant employed wrongful means in its interference with Plaintiffs’ business relations, which is a requirement under New York law.