New York seeks to expand Barclays 'dark pool' lawsuit

Wed Jan 21, 2015 5:28pm EST
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By Jonathan Stempel

NEW YORK (Reuters) - New York State Attorney General Eric Schneiderman on Wednesday moved to expand his lawsuit accusing Barclays Plc of fraud for having deceived clients and investors about how it operated a private U.S. trading venue known as a "dark pool."

The attorney general said new evidence shows that several top executives knew how the British bank falsely led people to believe that its electronic trading services offered protection from "predatory," "toxic" and "aggressive" trading practices.

Schneiderman's office also said Barclays reneged on its public promises to cooperate with his probe, including by resisting subpoenas for testimony by its two top equities electronic trading executives, William White and David Johnsen.

"Investors and clients should see what's truly going on," an official in Schneiderman's office said on Wednesday.

Barclays had sought to dismiss Schneiderman's original complaint filed last June 25, saying there was no showing that investors were harmed.

Wednesday's filing "repackages the same flawed arguments," Barclays said in a statement. "While we continue to seek to cooperate with the New York Attorney General in this matter, we will continue to defend vigorously against these allegations."

Dark pools were designed to quietly trade shares before investors in the broader market could learn about and bet against the trades. They can be cheaper to use than exchanges.

Schneiderman claims that Barclays used its dark pool to give an unfair edge to high-frequency traders, boosting revenue and bonuses. He said this violated the state's Martin Act, a powerful anti-fraud law.   Continued...

Logos are seen outside a branch of Barclays bank in London July 30, 2013. REUTERS/Toby Melville