SAN FRANCISCO, CA (August 18, 2020)—Three plaintiffs have filed a class-action lawsuit in U.S. District Court against brokerage giant E*TRADE, claiming a software glitch trapped traders into small-size contracts when oil prices went negative for the first time in history.
The unprecedented crash happened in the crude oil futures market on April 20, 2020, catching investors off guard and locking out E*TRADE customers from accessing their accounts and trading services. The plaintiffs allege the company’s failed online platform left them essentially flying blind, locked into their investments, and blocked from trading. The outage cost individual consumers tens of thousands of dollars.
“After ignoring multiple red flags and having the foresight into the possibility of oil futures trading negatively, E*TRADE failed to test its platform and maintain customers’ access to trading services,” said lead plaintiff attorney Brian Kabateck. “The company’s negligence caused tremendous and preventable financial losses to amateur investors who trusted the electronic trading system,” said Kabateck.
While E*TRADE allowed customers to trade when the “e-mini” futures prices for crude were positive, the platform suffered an outage that failed to show the accurate price of the crude oil futures contracts when the spot price dropped below zero. Once the price went negative, the platform continued to show a positive value, but did not display a bid or ask price for its customers to close out their trades.
- Matthew Cheung, a plaintiff from New Hampshire, received a statement from E*TRADE that showed that his e-mini contracts were closed at -$376.300 resulting in a margin balance owed to E*TRADE of $947,900 for the expired contracts. The next day E*TRADE revised its confirmation to reflect a closing price on Cheung’s position of -$37.63 and a margin balance of $101,225 that he owed for the expired contracts.
- Benjamin Whitesides, a plaintiff from Utah, received a statement from E*TRADE that showed that his e-mini contracts were closed at -$376.300 resulting in a margin balance owed to E*TRADE of $565,537.50 for the expired contracts. The following day E*TRADE revised its confirmation to reflect a closing price on Whitesides’ position of -$37.63 and a margin balance owed of $57,532.50.
- Aziz Mohand, a plaintiff from California, received a statement from E*TRADE that showed that his contract closed at -$376.300 resulting in a margin balance owed to E*TRADE of $189,350 for the expired contracts. On April 21, 2020, E*TRADE revised its confirmation to reflect a closing price on Mohand’s position of -$37.63 and a margin balance owed of $20,015 for the expired contracts.
Link to lawsuit: https://drive.google.com/file/d/1Pc-BfgZ0lwi82TFkavaXqvP9KcsMa4tt/view?usp=sharing