Initial Lawsuit
First Complaint - 06/16/2022An investor filed a class action lawsuit on behalf of all persons who purchased, invested or otherwise acquired shares in the following ETFs pursuant to Direxion’s allegedly false and misleading statements prospectus, registration statements, amendments, and other company statements & SEC filings*:
- Direxion Daily Gold Miners Index Bull 2X Shares (“NUGT”, formerly “Direxion Daily Gold Miners Index Bull 3X Shares” before March 31, 2020);
- Daily Junior Gold Miners Index Bull 2X Shares (“JNUG”, formerly “Daily Junior Gold Miners Index Bull 3X Shares” before March 31, 2020); and
- Other Direxion leveraged ETFs, 3X or 2X actively managed exchange-traded funds offered by Direxion Shares ETF Trust.
The complaint alleges price manipulation, fraudulent, deceptive tactic in the purchase and sale of the security, in connection with the Funds from December 1, 2016 through November 30, 2021 for Exchange Act Section 10(b) claim and from December 1, 2018 through November 30, 2021 for all other claims, except for the Exchange Act Section 20A claim.
*”in all Prospectuses, traceable Form N-1A Registration Statements, Amendment No. 260, 262 on February 27, 2020, Amendment No. 285 & 287 on December 30, 2021 and other post-effective Amendments, Statements of Additional Information and other Exchange Act filings.”
- Filing Date
06/16/2022 - Class Period
12/01/2016 to 11/30/2021 - Transgression
Securities Violation - Filing Firms
Xu Law Offices P.C. - Case Title
Xu v. Direxion Shares ETF Trust - Docket Number
1:22-cv-05090 - Court
New York Southern District Court - Free File
Complaint
Allegations
Excerpt
“Affiliate with other market makers, Direxion controls and manipulates the Fund price, including the intraday price, pre-closing violent swing trading, pre-market and after-market time trading, long-term price slipping down, the forward and reverse splits, making them patterns in short-term, middle-term, and long-term price manipulation.
[…]
Direxion made this by hidden mathematic defects in the design, and mostly to make the shorting profit faster and bigger, by short-term, middle-term, and long-term price manipulation.
Direxion provide partial information of enlarged volatility and compounding to deceit the public investors, hiding the serious compounding effect of long-term loss of the Funds. Direxion provided fraudulent and misleading information in its public disclosures, from the registration to the following SEC information disclosures, that long-term investment may receive higher return or at least have similar win-loss return opportunities.
All Direxion 3x or 2x leveraged ETFs, by its design, are shorting tools, no matter the bull or bear in their names. Direxion and all responsible defendants know it either in Funds’ design or in operation, and tried all the ways to cover the truth in its public disclosures.
Direxion provides pairs leveraged funds to mislead the market to long respective directional funds. However, both bull and bear leveraged ETFs are shorting tools. Adding leverage, all investors can only lose their fortunes quicker.
Direxion misrepresented that the Funds are seeking daily leveraged return and named the Funds as “Daily” period. However, the Funds’ price cannot be leveraged during trading day period other than the pinpointed closing time, in which time Direxion rebalance and readjust its position. Therefore, the Funds mislead and misrepresent from their names by claiming “daily”, “Leverage”, “Bull/Bear”, and “Gold Miners”.
Direxion manipulate the intraday prices to mimic the underly indexes’ trend while investors do not know. Direxion control the closing prices to deviate the leveraged return. Direxion manipulate the rebalance and readjustment of the closing price to make short swing trade profit.
Direxion utilize the reverse split and forward split to further manipulate the market price, collect additional profit from the investors.
Direxion practiced all tactics to deceive and mislead investors, control and manipulate prices, hunting short term, long term, middle term profit, making the trend to serve its illegal market manipulation purposes.”
Defendants
- Trust
Direxion Shares ETF Trust - Company
Rafferty Asset Management LLC - Company
Direxion Family of Investment Companies - President
Daniel D. O'Neill - Trustee
Daniel J. Byrne - Trustee
Gerald E. Shanley, III - Trustee
Jacob C. Gaffey - Other
Patrick J. Rudnick - Chief (Other)
Angela Brickl - Other
Todd Kellerman - Employee
Paul Brigandi - Employee
Tony Ng - Other
Michael Raffety - Other
Defendant Kathleen Rafferty Hay - Company
U.S. Bancorp Fund Services, LLC - Company
Foreside Fund Services, LLC - Company
Direxion Advisors, LLC
