Mullen Ameritrade Schwab lawsuit

Mullen Automotive Sues Ameritrade and Schwab in Stock Lawsuit

Mullen Automotive, a prominent electric-vehicle manufacturer headquartered in Brea, California, has initiated legal action against brokerage giants TD Ameritrade and Charles Schwab, asserting allegations of facilitating naked short selling that purportedly inflicted severe damage to the company’s stock price. In a lawsuit filed on Tuesday in a federal court in New York, Mullen Automotive contends that TD Ameritrade and Charles Schwab, along with approximately 10 unidentified individual broker dealers, engaged in illicit activities, resulting in the unauthorized sale of over 34 million ‘fictitious’ company shares and ‘fully paid-for’ stock owned by Mullen shareholders.


The lawsuit claims that TD Ameritrade and Charles Schwab executed these transactions without proper authorization or the underlying shares to back them up, thereby engaging in naked short selling. This unlawful practice, according to Mullen Automotive, disseminated inaccurate and misleading information into the market, falsely suggesting the existence of more Mullen shares available for trading than were actually available. Consequently, the electric-vehicle company’s share price suffered substantial declines.


The lawsuit by Mullen Automotive seeks unspecified damages as redress for the alleged misconduct by TD Ameritrade and Charles Schwab. The company, which debuted on the Nasdaq in November 2021 following a merger with a listed payments company, has progressively acquired struggling peers such as Electric Last Mile Solutions, Inc., and privately-held Bollinger Motors. However, the company’s share price took a significant downturn beginning in February and has since plummeted by 99% year-to-date.


Representatives from Charles Schwab acknowledged their awareness of the lawsuit but indicated that a comprehensive review was pending. On the other hand, Mullen Automotive did not promptly respond to requests for comments.


Beyond the financial implications, this legal confrontation carries broader repercussions for both TD Ameritrade and Charles Schwab – titans in the brokerage sector, entrusted with the financial assets of millions of customers. The outcome of the lawsuit is poised to resonate throughout the industry, potentially serving as a cautionary tale against reckless practices that carry grave consequences.


Irrespective of the eventual verdict, the allegations levied by Mullen Automotive underscore the criticality of transparency within the finance industry. This legal battle holds the potential to establish a precedent that fosters trust and security within the sector, influencing the conduct of market participants. As this legal battle unfolds, it serves as a vivid reminder that corporations must be held accountable for their actions, reaffirming the paramount importance of safeguarding the financial interests of their clientele.


Source: Bloomberg

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