This thing gets more interesting every day- (and shadier dealings)-- update from Bloomberg--Can't blame ET for trying :-(
quote.bloomberg.com
Nomura Sues E*Trade for $10 Million Over Stock Loan (Update1)
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, under the terms of their lending agreement, 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 also alleges that E*Trade improperly tried to collect another $4.9 million on four consecutive days last week by claiming the value of the GenesisIntermedia shares had increased to $9 a share from $6 during the trading halt after the New York Stock Exchange advised Nomura to value the shares at zero.
``E*Trade's only possible reason for trying to mark up the GENI shares is the hope a Nomura employee may make an error and E*Trade will improperly profit from the error,'' alleged Nomura.
E*Trade spokesman John Metaxas said the suit has no merit. ``E*Trade is confident its actions were appropriate,'' he said.
Menlo Park, California-based E*Trade was one of four brokerage firms that borrowed a total of 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, according to Stockwalk.
Collapse
MJK later collapsed after it was unable to repay $60 million to the firms, including about $30 million to E*Trade. The money came due after 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. |
