Knight Trading Group Accused of Fraud in Shareholder Lawsuit
Newark, New Jersey, Nov. 21 (Bloomberg) -- Knight Trading Group Inc., the largest Nasdaq Stock Market middleman, has been sued for allegedly defrauding investors before disclosing a drop in earnings on Oct. 4 that caused its stock price to fall.
The shareholder lawsuit, which seeks class-action status, accuses Knight of misleading investors between July 19 and Oct. 4, when it disclosed that third-quarter earnings declined by as much as 41 percent, rather than rising as expected.
Bloomberg News reported that shares in Knight, based in Jersey City, New Jersey, fell more than 11 percent that day, to $28.50.
Knight ``repeatedly issued false and misleading statements about the company's revenues and profits which resulted in artificially inflated profits for the company's common stock,'' alleges the federal lawsuit filed in Newark, New Jersey.
``The truth fully emerged when the company preliminarily disclosed its third quarter 2000 earnings on October 4,'' the lawsuit said.
The lawsuit also alleges that between July 19 and Oct. 4, Knight co-founder Steven Steinman sold $31.4 million worth of company stock; company director Peter Hajas sold $13.3 million in stock, and executive vice president Robert Lazarowitz sold $6.8 million in stock. All three are named as defendants in the suit.
Knight's CEO Kenneth Pasternak also was listed as a defendant.
Shareholder Patricia Murray is named as the plaintiff in the case.
Representatives of Knight could not immediately be reached for comment.
Nov/21/2000 18:37 ET
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