The lawsuit claims the US brokerage didn’t sufficiently caution investors of negative US oil risk prices.
When oil prices in the US went negative for the first time in history back in April of this current year, traders and brokers were caught off guard. These recent days a class action lawsuit has been filed against E*Trade, based on allegations that the brokerage didn’t sufficiently caution investors of the risk.
Earlier this week, the lawsuit seen by Finance Magnates was filed on Tuesday in the Northern District Court of California. The document alleged that E*Trade didn’t sufficiently caution investors of risks by advising customers that prices could turn negative and neglected to appropriately test its online trading platform for the chance of negative oil futures.
Negative oil prices led to hundreds of millions of dollars in losses not only in the United States but over the entire industry. Customers of E*Trade alone lost hundreds of thousands of dollars.
The lawsuit filed by Kabateck LLP, Girard Bengali APC, and Actium LLP said the following:
“In offering trading services, E*TRADE assumed a duty to ensure that its systems were sufficiently equipped to reliably deliver such services under foreseeable customer demands and market conditions, such as those that occurred on April 20, 2020.”
“Plaintiffs and members of the proposed class understood and reasonably believed that E*TRADE had or would take such steps, but it did not. E*TRADE failed to adequately or properly equip itself technologically and systemically to maintain Plaintiffs and class members’ access to trading services.”
“Due solely to its own negligence and failure to maintain an adequate infrastructure, E*TRADE breached obligations owed to Plaintiffs and class members and caused them substantial losses. Its failures are all the more serious due to the magnitude of the outage, the absence of alternative means for customers to protect their investments, and the lack of communication and customer support.”
The lawsuit claims E*Trade knew of possible negative prices.
The lawsuit likewise affirms that E*Trade knew about the possibility of oil prices turning negative for a week and still didn’t test its system. In addition, the plaintiffs blamed the US brokerage’s platform for suffering an outage which neglected to show the precise price of crude oil futures contracts for e-mini futures when the spot price fell below zero.
The lawsuit was filed against E*Trade Securities, LLC, and E*Trade Futures, LLC. The document affirms break off-obligation of sincere trust and reasonable managing, negligence, and gross negligence.