Barclays Sued by Investor Over Losses From Dark Pool Suit

Barclays Plc was sued by an investor over a plunge in share prices that followed New York Attorney General Eric Schneiderman’s lawsuit accusing the bank of lying to customers and hiding the role of high-frequency traders to promote its dark pool.

Barbara Strougo of New York filed her case today in Manhattan federal court, claiming she and other buyers of Barclays American depositary shares lost money after the attorney general brought his lawsuit June 25. Barclays fell 7.4 percent in New York trading the following day.

The bank falsified marketing materials to hide how much high-frequency traders were buying and selling and failed to disclose that “significant” revenue was made by favoring those traders over other clients of the dark pool operation, known as Barclays LX, according to Strougo’s lawsuit.

As recently as a May 6 filing with the U.S. Securities and Exchange Commission, Barclays made materially false and or misleading statements and failed to disclose the operation of Barclays LX, according to Strougo.

Her suit is among the first to be brought by an investor in the wake of New York’s complaint, which was filed in New York State Supreme Court. Strougo is seeking to proceed on behalf of all investors who bought Barclays ADSs from Aug. 2, 2011, to June 25, 2014.

Mark Lane, a spokesman for London-based Barclays, declined to comment on the lawsuit.

‘Factual Errors’

Barclays is fighting allegations it lied to customers and masked the role of high-frequency traders as it sought to boost revenue at what used to be Wall Street’s second-largest private-trading venue. The bank said July 24 that it’s seeking to have Schneiderman’s complaint dismissed, saying it’s based on “clear and substantial factual errors.”

Barclays said the attorney general also took New York’s securities law -- the Martin Act -- too far. The state’s suit ignores that customers who use Barclays LX are “highly sophisticated traders and asset managers” who are responsible for investing millions and billions of dollars’ worth of assets, the bank said in a state court filing.

Dark pools were created as a haven for institutional investors seeking to trade large blocks of shares in secret, hoping to minimize their impact on prices so they can get a better deal on their trades.

The case is Strougo v. Barclays Plc, 14-cv-05797, U.S. District Court, Southern District of New York (Manhattan).

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