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Short-Selling Claims Put Accusers on Defense in Delaware Court

Firms allegedly shorted stock based on what they learned in discovery for a class-action lawsuit

IDT Corp. in Newark, New Jersey.

IDT Corp. in Newark, New Jersey.

Photographer: Christopher Barth/AP Photo

Even within the brazen world of short-sellers, the allegations are eyebrow-raising.

Two investment firms filed a class action suit against a telecom company, claiming investors were short-changed during its $3.1 billion sale. Then, the telecom company claims, they used the lawsuit as a kind of Trojan horse to gain access to confidential information, which helped them execute millions of dollars in short sales and other trades.