Mullen Automotive files suit against investors, alleging it used ‘spoofing’ to manipulate stock price
Shares of Mullen Automotive Inc. fell 2.3% Friday after the electric vehicle maker filed a lawsuit against a group of investors accusing it of using a strategy known as spoofing to manipulate its stock price between Nov. 9, 2021, and Nov. 9, 2021. I did. 2023.
The stock last traded at 15 cents, just above its all-time low of 14.71 cents. Mullen’s stock is down 99.8% so far this year, while the S&P 500 SPX is up 19%.
Spoofing is “submitting and canceling buy and sell orders without the intent to trade in order to manipulate other traders,” the company said in a regulatory filing, citing the Securities and Exchange Commission’s definition.
The SEC described spoofing as a “harmful strategy” used by some high-frequency traders to create the impression of a real offerbook imbalance as a way to manipulate prices.
“During this period, defendants placed thousands of spoof orders to create the illusion that Mullen’s stock price was falling. “These orders were intended to ‘trick or entice’ other investors into selling their shares, thereby driving Mullen’s stock price further down,” the filing said.
Also read: Shares of Mullen Automotive have fallen to record lows as the company moves forward with plans for another reverse stock split.
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Nasdaq said it relied on efficient markets that were not manipulated when it sold more than 5 billion shares at artificially depressed prices due to spoofing. This caused the company to lose hundreds of millions of dollars, if not more, the filing said.
Typically, traders buy when they think the price of a security will rise further and sell when they think the price will fall further.
“However, one clear sign of manipulative spoofing is a sharp reversal in trading direction, for example, where a market participant places a large number of sell orders, then places buy orders, and then cancels the sell orders,” the filing said. . . “This type of behavior strongly suggests that the original sell order was not intended to be executed and was simply a ploy to lower the price to ‘buy low.’”
From the archive (July 2023): Mullen Automotive’s stock price more than doubled in two days. Here’s why:
The defendant in the suit is named IMC, an Illinois limited liability company. Clear Street, a Delaware limited liability company; UBS, a Delaware limited liability company; John Does 1 through 10, entities that include market makers, broker-dealers, subsidiaries, affiliates and sister companies of the defendants and their customers whose identities are currently unknown.
The lawsuit was filed in the U.S. District Court for the Southern District of New York.
Mullen is a loss-making company with a net loss of $792.7 million for the first nine months of fiscal 2023 through June 30. This is wider than the $523.1 million loss recorded in the same period last year.
