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The first private suit over alleged rigging of a trading volatility index was filed in federal court Feb. 21, less than 10 days after a whistleblower alerted federal regulators to the problem.
A putative class action is against unnamed traders who allegedly rigged the Chicago Board Options Exchange (Cboe) Volatility Index, known as the VIX.
The lawsuit is based on claims from an anonymous tipster to the Securities and Exchange Commission and Commodity Futures Trading Commission on Feb. 12 that a flaw in VIX has allowed trading firms to manipulate the index for “multiple billions in profits.”
The allegations, which financial regulators are reportedly investigating, are the latest in a string of market fraud claims that have engendered follow-on class action suits.
This suit says unnamed traders rigged the VIX in violation of the antitrust Sherman Act. It seeks treble damages on behalf of everyone that ever bought or sold VIX-linked futures, options, exchange-traded funds, or exchange-traded notes on the Cboe.
Because trading on the Cboe is anonymous, no individuals or firms are named as defendants. The sole named plaintiff, Joseph Samuel, says that “Cboe Global Markets, Inc. — the publisher of VIX and operator of the Cboe and CFE exchanges — is in possession of information capable of specifically identifying defendants and, thus, plaintiff will be able to identify defendants through discovery.”
The case was filed in the U.S. District Court for the Southern District of New York, which is home to suits alleging rigging of forex, Libor, the ISDA fix, credit default swaps, municipal derivatives, SSA bonds, Treasury bonds, and Yen Libor. In addition to these alleged market abuses, another set of suits in the same federal court alleges that traders for big banks rigged the markets for aluminum, silver, gold, platinum, and palladium.
The case is Samuel v. Does , S.D.N.Y., 18-cv-01593, 2/21/18
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