The GenisisIntermedia fiasco begins--ET is sued by Nomura for 9.9M$
quote.bloomberg.com
Nomura Sues E*Trade to Recover $9.9 Million From Stock Loan
By David Glovin
New York, Oct. 23 (Bloomberg) -- A unit of Nomura Holdings Inc. claims in a federal lawsuit that E*Trade Group Inc., the second-biggest online broker, has refused to return $9.89 million it owes Nomura from a stock loan.
Nomura Securities International Inc. said that on Sept. 25, it held 1,649,100 shares of GenesisIntermedia.com Inc., which the unit of Japan's largest brokerage had borrowed from E*Trade on June 21. Nomura said it's tried to return the shares and E*Trade ``refused to return Nomura's cash collateral.''
The Securities and Exchange Commission on Sept. 25 halted trading in GenesisIntermedia, a Los Angeles telemarketing company controlled by Saudi arms dealer Adnan Khashoggi, as the agency probes whether someone manipulated the stock.
Nomura isn't the only firm that borrowed the GenesisIntermedia shares at issue.
Menlo Park, California-based E*Trade was one of four brokerage firms that borrowed 7.2 million GenesisIntermedia shares from MJK Clearing Inc., the clearing unit of Minneapolis-based brokerage Stockwalk Group Inc., in exchange for about $125 million.
Collapse
MJK later collapsed after it was unable to repay at least $65 million to the firms, including $30 million to E*Trade. MJK ran out of cash after repaying $60 million, which came due when GenesisIntermedia stock plunged 66 percent.
MJK couldn't pay the money because Native Nations Securities Inc., which lent MJK the 7.2 million shares, defaulted on a related $60 million payment that was due to MJK.
An E*Trade spokesman didn't immediately return a call seeking comment.
Nomura said in its suit that it had originally borrowed 2.45 million shares from E*Trade in exchange for $41.7 million cash collateral. Between June and September, Nomura returned 805,900 shares to E*Trade, and E*Trade returned some of the cash to Nomura. When Nomura tried to return the remaining shares, E*Trade refused to hand over the rest of the money it owed, the suit says.
E*Trade ``refused to accept the borrowed shares and continued to hold $9,894,600 of Nomura's money,'' Nomura said in its complaint, which was filed yesterday in Manhattan federal court.
After borrowing the shares from MJK, E*Trade and the three other brokerage firms lent them to Nomura, A.G. Edwards Inc., and Wedbush Morgan Securities, according to Stockwalk.
Nomura also claims that E*Trade has used an automated funds- and stock-delivery system to try to transfer an additional $4.9 million from Nomura into E*Trade's account. |
