In summary Finra didn’t have any issues with the s1 filings, and there were several. What happened was their hedge fund buddies sold 600 million counterfeit shares into a company that was going private. According to Finras rules, you cannot take shorts into a private company. The shorts should’ve been forced to close at market prices which were, on average, $4,000/share. What’s at issue? They robbed retail investors of $2.4 trillion dollars and put the halt on to protect their golf buddies. According to the court documents, more than 65,000 shareholders have been affected by the events related to MMTLP stock. Many of these shareholders also believe that MMTLP was unjustly halted in order to protect short sellers from selling their positions.
This article is just a copy of the ongoing FINRA apologetics for shielding the short hedge funds’ catastrophic failure due to naked shorting. Time to pay the piper, GTSX, Canaccord, and others. Cut the nonsense, and they might avoid jail time.
MMTLP Stock: Rep. Ralph Norman Questions Gary Gensler on Aggregate Share Count
The clip, which was posted on X, the platform formerly known as Twitter), by user @unusual_whales, ends by Norman saying that he will try to write Gensler another letter concerning MMTLP.
Making Money With Charles Payne
December 22, 2023
04:36
CLIP
SEC's Gary Gensler 'tap danced' around MMTLP questioning: Rep. Ralph Norman
Rep. Ralph Norman, R-S.C., discusses his letter to SEC Chair Gary Gensler and FINRA regarding Meta Materials stock on 'Making Money.'
https://www.foxbusiness.com/video/6343746810112
The Financial Industry Regulatory Authority (FINRA) had previously addressed the MMTLP fiasco in a FAQ post on its website. In the post, FINRA noted that it has the power to halt trading in an over-the-counter (OTC) security when it believes that an extraordinary event has occurred or is ongoing that will have a material effect on the security. FINRA made this determination for MMTLP and halted shares on Dec. 9.
So, why exactly was MMTLP halted on Dec. 9 when shareholders as of Dec. 12 were eligible to receive the Next Bridge distribution? That’s largely attributable to the fact that securities transactions typically settle within two business days, based on SEC policies.
“Therefore, for purposes of the Next Bridge / MMTLP corporate action, only those trades in MMTLP that were executed on or before December 8 typically would have settled in time to establish the purchaser as a new holder of the shares as of December 12,” explained FINRA. As a result, any buys of MMTLP past Dec. 8 would have not settled in time for the buyer to receive shares of Next Bridge.
FINRA also goes on to highlight that it did not cancel shares of MMTLP. Rather, Meta Materials (NASDAQ:MMAT), the issuer, was responsible for this, effective as of Dec. 14, 2022.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
MMTLP Issues Force FINRA To “Examine” Trading Halt… Again
November 12, 2023 12:17 PM
Meta Materials Preferred Shares, or MMTLP stock, has been left in limbo since the U3 halt imposed by the Financial Industry Regulatory Authority (FINRA) on Dec. 9. On the bright side, shareholders should expect to hear some answers soon. In April, a shareholder filed a petition for pre-action disclosure against FINRA, asking the regulatory organization for blue sheet information related to the trading of MMTLP stock and Meta Materials (NASDAQ:MMAT) stock.
Blue sheet information contains data such as trading records and account holder information. The petitioner believes that receipt of this data could lead to evidence of “stock spoofing, naked short selling, market manipulation, and fraud” in MMTLP and MMAT.
Per the court document:
“The information Petitioner seeks is readily available to Respondent, and would impose essentially no burden on Respondent. Indeed, Respondent only needs to check its records for the Blue Sheets on MMAT and MMTLP, and turn the relevant information over to Petitioner’s legal counsel.”
FINRA Must Respond to MMTLP Lawsuit by May 19
FINRA has previously acknowledged that it possesses the blue sheet information from “unknown and unidentified brokers securities transactions in MMAT and MMTLP.” As a result, all the agency has to do to satisfy the petition is to turn over the information.
May 19 is a key date, as that is the deadline for FINRA to file its opposition to the petition. According to Civil Law Self-Help Center:
“If a motion is filed against you and you do not file a written opposition with the court, the judge could grant the other side’s motion automatically. That means the other side could get whatever she is asking for in the motion. It also might mean you lose the case, depending on the motion that was filed.”
FINRA will also have until May 26 to file a “reply, if any.” On May 30, FINRA is also scheduled to make an appearance at the New York County courthouse. On that date, FINRA will show cause as to why it should not release the blue sheet data
According to the court documents, more than 65,000 shareholders have been affected by the events related to MMTLP stock. Many of these shareholders also believe that MMTLP was unjustly halted in order to protect short sellers from selling their positions.
On March 16, 2023, the Financial Industry Regulatory Authority (FINRA) released responses to frequently asked questions concerning the MMTLP corporate action and trading halt that occurred on the same date. In this corporate action, the issuer decided to cancel MMTLP shares and distribute shares of Next Bridge Hydrocarbons to the investors holding MMTLP shares.
But it did not stop there. FINRA said it has been receiving numerous inquiries about the circumstances surrounding these events, with a particular focus on concerns related to short selling in MMTLP and the notion of “counterfeit shares.” Although the term “counterfeit shares” lacks clarity, it has been used in social media conversations when discussing “naked” short selling and failures-to-deliver (FTDs).
INRA
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We have published a supplemental FAQ with additional information relating to a corporate action and trading halt in the Series A Preferred Shares of Meta Materials that traded under the symbol MMTLP.
Learn more ▶️ https://bit.ly/3QqooKj
4:19 PM · Nov 6, 2023
The corporate action
In June 2021, the merger between Torchlight Energy Resources and Metamaterial Inc. formed Meta Materials. While the common stock of Meta Materials was listed on Nasdaq, the Series A Preferred Shares were not listed and later began trading on the OTC market under the symbol MMTLP.
On July 15, 2022, Meta Materials filed a registration statement with the Securities and Exchange Commission (SEC) to register the issuance of common stock for Next Bridge Hydrocarbons, a subsidiary. As part of this action, Meta Materials would distribute one share of Next Bridge common stock for each MMTLP share held and cancel the Series A Preferred Shares. The registration statement for Next Bridge shares became effective on November 18, 2022.
On November 23, 2022, Meta Materials announced that MMTLP shareholders as of December 12, 2022, would receive one share of Next Bridge common stock for each MMTLP share held. This distribution took place on December 14, 2022, alongside the cancellation of MMTLP shares. The Next Bridge shares received in the distribution were not eligible for electronic transfer through DTC or other clearing corporations.
FINRA was notified of this corporate action as required by federal law, and they issued a public notice on their website on December 6 and 8, 2022, stating that Next Bridge shares would be distributed to MMTLP shareholders with settled positions as of December 12, 2022. Purchasers after December 8, 2022, were not entitled to receive Next Bridge shares.
Additionally, FINRA halted trading in MMTLP on December 9, 2022, due to concerns related to investor protection and public interest.
Right number of Next Bridge shares
As the MMTLP issuers continue to hound FINRA with their questions, the regulatory body decided to issue a supplemental FAQ on Monday to provide further information to address these questions and concerns.
On the matter of identifying if the right number of Next Bridge shares were distributed in connection with the corporate action, FINRA clarified that it does not play a role in distributing securities as part of a corporate action, and it does not regulate issuers or transfer agents. However, publicly available information from Next Bridge regarding the corporate action states that they distributed 165,472,241 of their common stock shares to MMTLP shareholders on a one-for-one basis. This distribution was managed through their transfer agent, American Stock Transfer & Trust Company, LLC (AST), which handled the distribution either directly to MMTLP shareholders registered with AST or to shareholders’ bank, broker, or nominee representatives.
“Thus, the issuer has represented that 165,472,241 Next Bridge shares were distributed in connection with the Next Bridge / MMTLP corporate action—the same number of shares anticipated to be distributed to MMTLP shareholders per the prospectus filed with the SEC,” said FINRA.
The information from both Meta Materials and Next Bridge, before and after the corporate action, indicates that the number of MMTLP shares expected to be outstanding matches the number of Next Bridge shares distributed to MMTLP shareholders on a one-for-one basis. FINRA reportedly has not found any information to the contrary.
Asking FINRA to “audit”
FINRA said it has received queries regarding conducting a “share count audit” for Next Bridge/MMTLP shares. However, the regulatory body asserted that the term “share count audit” is vague, and its usage in social media may refer to a review to determine the presence of “counterfeit shares” resulting from “naked” short selling and FTDs in MMTLP.
Unfortunately, FINRA lacks the jurisdiction, authority, or data required for such an audit, it said.
“FINRA does not have jurisdiction or authority over issuers like Next Bridge or transfer agents like AST. Transfer agents are overseen by the SEC, are responsible for maintaining issuer security holder records, and have responsibilities concerning the reconciliation and safekeeping of securities,” the agency emphasized.
In addition, FINRA said it does not possess the necessary information to conduct a “share count audit.” Some have suggested using “blue sheet” data for this purpose, but this data lacks the specifics required for such an audit. Blue sheet data provides transaction details but does not identify the positions held in a security on a particular date or whether a short sale was “naked.” Furthermore, blue sheet data is not designed to ascertain the beneficial owners of all MMTLP shares, and its access is strictly controlled due to its sensitive nature.
2.65 million shares out of 165.47 million
On the question of how much short selling was there in MMTLP around the time of the Next Bridge/MMTLP corporate action, FINRA said it occasionally collects short interest data from broker-dealers and publishes reports based on that information. However, short interest data for MMTLP around the time of the corporate action was not made publicly available due to the cancellation of MMTLP shares before the next reporting settlement date.
Based on regulatory efforts, FINRA estimates that the short interest position in MMTLP as of December 12, 2022, was approximately 2.65 million shares, which accounts for only 1.6% of the total shares outstanding. This short interest position had significantly decreased between November 15 and December 12.
“The short interest position in MMTLP had therefore decreased substantially—by nearly 60%—between November 15 and December 12. Specifically, short interest in MMTLP as of November 15, 2022, (approximately 6.4 million shares) declined around 27% to approximately 4.7 million shares as of November 30, 2022, and declined about a further 32% to approximately 2.65 million shares as of December 12,” the regulatory body clarified.
Moreover, daily short sale volume data, which has been a topic of discussion on social media, differs from short interest reports and often includes temporary short positions arising from handling customer orders. It does not reflect significant short positions in the conventional sense.
Excessive “naked” short selling resulting in “counterfeit shares”?
The concept of “counterfeit shares” has been discussed in social media conversations, particularly concerning “naked” short selling and FTDs in a security. A “naked” short sale, FINRA explained, generally refers to a short sale where the seller fails to borrow or arrange to borrow the securities for timely delivery, leading to an FTD. However, it’s important to note that “naked” short sales are not explicitly identified in short sale data, the agency said.
FINRA has found no evidence of significant “naked” short selling in MMTLP near its last day of trading, which contradicts claims of “counterfeit shares.” The SEC did not publish FTD data for MMTLP for December 12, but FTDs as of December 9 were minimal. Furthermore, based on estimates, only a tiny fraction of short positions in MMTLP as of December 12 could potentially have resulted in FTDs. Broker-dealers had adequate stock borrows or margin securities to cover the vast majority of open short positions.
These factors, together with other indicators, suggest that extensive “naked” short selling was not a significant issue in MMTLP near the end of its trading.
Have all MMTLP shareholders received their Next Bridge shares?
FINRA explained that Next Bridge has distributed its common stock to MMTLP shareholders as part of the corporate action, either directly or via their bank, broker, or nominee representatives. The absence of a CUSIP number for Next Bridge shares might have caused some confusion, but it does not affect the status of Next Bridge shares in a customer’s account.
Purchasers who bought MMTLP shares from short sellers may still have been recorded as eligible to receive Next Bridge shares in the distribution, provided the short seller managed to deliver MMTLP shares by December 12. However, as mentioned in a previous response, there were very few short positions in MMTLP as of December 12, and the majority of shares traded might have been settled using borrowed shares.
As the regulatory body noted above, there were a very small number of short positions in MMTLP as of December 12, 2022, that could potentially have resulted in FTDs.
Why did FINRA halt trading in MMTLP before December 12?
FINRA explained that it has the authority to impose a quoting and trading halt in an OTC equity security when it determines that an extraordinary event has occurred or is ongoing, causing a material effect on the market for the security or potential major disruption to the marketplace.
“FINRA made such a determination for MMTLP and halted trading on December 9 because, after December 12 (the settlement date for trades executed on December 8), the MMTLP shares would cease to be DTC-eligible; the MMTLP shares would be cancelled by the issuer at the time of the distribution; and Next Bridge common stock was not expected to be DTC-eligible,” the agency said.
FINRA also holds the view that, without implementing a trading halt, the circumstances mentioned above would have created substantial challenges for ongoing trading beyond December 8. This could have led to considerable uncertainty in the settlement and clearance process for such trades. Consequently, FINRA concluded that an extraordinary event, as defined by its trading halt rule, had taken place, and therefore, they halted MMTLP trading on December 9.
It’s worth noting that the presence or absence of short positions in MMTLP was not a determining factor in FINRA’s decision to halt trading; their primary concern was the clearance and settlement process.
Closing short positions
The Next Bridge/MMTLP corporate action did not mandate the closure of short positions, FINRA clarified. Broker-dealers have procedures in place to adjust short positions following a corporate action. Short sellers remain subject to close-out obligations under SEC Regulation SHO.
Investors with short positions in MMTLP would have corresponding short positions in Next Bridge if they did not close out their MMTLP positions before the corporate action. The existence of a loan does not necessarily require the purchaser to buy or return the securities until the lender recalls the loan.
“It is not uncommon for short positions to be open when a corporate action occurs,” explained FINRA. “Thus, an investor with a short position in MMTLP who did not close out that position before the corporate action would have a corresponding short position in Next Bridge.”
Very difficult for Next Bridge shareholders to trade their shares
Trading Next Bridge common stock is currently challenging, FINRA said, because Next Bridge has not taken the steps to facilitate secondary market trading. Next Bridge chose not to seek DTC eligibility, hindering central clearance and settlement of securities transactions.
“However, today it is very difficult for Next Bridge shareholders to trade their shares because Next Bridge has not taken the steps necessary to facilitate secondary market trading,” FINRA answered. “Next Bridge acknowledged that the absence of DTC eligibility would hamper trading.”
Furthermore, they opted not to obtain a CUSIP number, which prevents broker-dealers from obtaining a trading symbol for Next Bridge common stock.
“Unless Next Bridge takes steps to facilitate trading in its common stock, shareholders will continue to have difficulty trading their securities,” the regulatory body ended.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
Khorassani v. Fin. Indus. Regulatory Authority Supreme Court, New York County
Jun 15, 2023
2023 N.Y. Slip Op. 32009 (N.Y. Sup. Ct. 2023)Copy Citation Index No. 153819/2023 MOTION SEQ. NO. 001
06-15-2023
DAVID KHORASSANI Petitioner, v. FINANCIAL INDUSTRY REGULATORY AUTHORITY, Respondent.
HON. SABRINA KRAUS JUSTICE
Unpublished Opinion
MOTION DATE 6/13/2023
DECISION + ORDER ON MOTION
HON. SABRINA KRAUS JUSTICE
The following e-filed documents, listed by NYSCEF document number (Motion 001) 8, 16, 17, 18, 19, 20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 42, 43, 45, 46 were read on this motion to/for DISCOVERY - PRE-ACTION.
BACKGROUND
Petitioner commenced this proceeding seeking an order, pursuant to CPLR § 3102(c), compelling pre-action disclosure to ascertain the identities of all brokers who traded Meta Materials, Inc. Series A Preferred Stock in the period leading up to December 14, 2022, referred herein as ticker symbol MMTLP.
The petition and moving papers set forth various dates for which the information is sought, at some points going back as far as June 2021. however at oral argument Petitioner's counsel agreed to limit the period to the two weeks prior to December 8, 2022.
For the reasons set forth below, the motion is denied, and the proceeding is dismissed.
ALLEGED FACTS On or about June 28, 2021, Torchlight Energy Resources ("Torchlight Energy")-a public company that traded under the ticker symbol "TRCH" on NASDAQ-merged with, and became, Meta Materials, Inc. ("Meta Materials" or "MMAT"). After the merger, Meta Materials' common stock began trading on the NASDAQ under the ticker symbol MMAT, and Meta Materials issued a special dividend in the form of a Series A Preferred Share (hereinafter called "MMTLP") to Torchlight Energy stockholders that held shares before the merger.
In October 2021, MMTLP shares were listed and began trading on the Over-the-Counter ("OTC") Market. Petitioner asserts that this was not intended, nor authorized, by either the previous board of directors of Torchlight Energy or the current board of directors of Meta Materials.
In July 2022, Meta Materials Board of Directors voted to spin out the assets of Torchlight Energy into a separate company, Next Bridge Hydrocarbons, Inc. ("Next Bridge"). Next Bridge publicly filed an S-l registration statement, which was approved by the Securities and Exchange Commission ("SEC") and became effective on November 18, 2022. On November 23, 2022, Meta Materials issued an announcement regarding the Next Bridge / MMTLP corporate action, stating that each holder of its Series A Preferred Shares-MMTLP-as of December 12, 2022, would become entitled to receive one share of the common stock of Next Bridge for every one share of MMTLP held. Meta Materials also stated that the Next Bridge shares would be distributed to MMTLP shareholders on December 14, 2022, at which time all MMTLP shares would be automatically cancelled and MMTLP holders would cease to have any rights with respect to those shares. In addition, the company stated that the Next Bridge shares received in the distribution would not be eligible for electronic transfer through The Depository Trust Company (DTC).
Meta Materials notified FINRA of the Next Bridge / MMTLP corporate action. On December 6 and 8, 2022, FINRA provided public notice of the corporate action on FINRA's website. FINRA's corporate action notice stated that the Next Bridge shares would be distributed to those MMTLP shareholders with settled positions as of December 12, 2022, and further clarified that any purchasers after December 8, 2022, (i.e., those with trades due to settle on or after December 13, 2022) would not be entitled to receive Next Bridge shares in the corporate action distribution. FINRA's corporate action notice also stated that the MMTLP symbol would be deleted effective December 13, 2022.
On December 9, 2022, FINRA halted trading in MMTLP. FINRA asserts it halted trading because only those trades in MMTLP that were executed on or before December 8 typically would have settled in time to establish the purchaser as a new holder of the shares as of December 12. For trades in MMTLP executed after December 8, the seller of MMTLP shares would still have been recorded as the holder eligible to receive Next Bridge shares as part of the corporate action distribution, and the buyer would not be recorded as eligible to receive Next Bridge shares in the distribution.
FINRA is permitted under its rules to impose a quoting and trading halt in an OTC equity security where FINRA determines that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the security or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process. FINRA made such a determination for MMTLP and halted trading on December 9.
Petitioner asserts that the shares of MMTLP that were outstanding between November 18, 2022, and December 8, 2022 (the "Relevant Period") should have never been publicly available for purchase or sale in the public market. Petitioner asserts that during the Relevant Period, some form of illegal activity transpired regarding the MMTLP stock that was trading, and that a significant percentage of the trading volume that occurred during this short time were short sales. As a result, the price of MMTLP share dropped from $8.90 on November 18, 2022, to $2,895 per share on December 8, 2022, causing harm to Petitioner.
Respondent keeps records known as Electronic Blue Sheets, that contain both trading and account holder information. This includes, but is not limited to, the name and symbol of the security, the date of the transaction, the quantity of the security bought or sold, the name and address of the broker submitting the report, and the broker-dealer that executed the transaction.
On or about December 16, 2022, a Freedom of Information Act request (FOIA Request Number 23-00564-FOIA) was submitted to the SEC, looking for infoimation from MMTLP Trading from December 1, 2022, through December 14, 2022, from FINRA, and information leading up to the FINRA imposed halt.
On March 30, 2023, the SEC responded, disclosing emails between the SEC and FINRA, which reflected that on or about December 5, 2022, FINRA was made aware of the MMTLP matter, as it had "hit [the] fraud team's radar." See Exhibit 3 to the Petition [NYSCEF Doc. No. 4], The email admits to the Blue Sheeting of both MMTLP and MMAT securities and, per this admission, the relevant Blue Sheets exist in Respondent's possession.
The MMTLP halt ended concurrent with FINRA's deletion of the MMTLP symbol, which occurred on December 13, 2022, however due to a technical glitch, FINRA's website was not updated until February 16, 2023, to reflect that the halt had ended. Because the MMTLP shares were cancelled by the issuer on December 14, it has not been possible to trade them since that time, irrespective of the halt status displayed on FINRA's website.
Respondent asserts there was no illegality in the MMTLP shares publicly quoted and traded. Where a security is or becomes tradeable, a public market for the security may develop-as it did with MMTLP FINRA does not approve a company's issuance of securities or approve or determine when broker-dealers or customers may begin trading those securities. However, once a broker- dealer executes a transaction in an unlisted security, the firm is required by FINRA rules to report the executed transaction to FINRA. And where a symbol does not yet exist for the security, the broker-dealer must request a symbol from FINRA. Because the issuer obtained a Committee on Uniform Securities Identification Procedures ("CUSIP") number for the Series A Preferred Shares, FINRA assigned the MMTLP symbol in 2021 upon request by a broker-dealer to facilitate electronic reporting of an executed transaction that occurred in the security.
A CUSIP number identifies registered stocks.
FINRA asserts it deleted the MMTLP symbol on December 13 because of the imminent cancellation of the shares as announced by the company in connection with the Next Bridge / MMTLP corporate action. Because the MMTLP shares have been cancelled by the issuer, they can no longer be traded, and the symbol can no longer be reinstated.
As described in the Next Bridge prospectus filed with the SEC, Next Bridge anticipated that the distribution process for the Next Bridge shares would take about two weeks and would be effected by its transfer agent, American Stock Transfer &Trust Company LLC. Petitioner asserts that as of the date of this Petition, the MMTLP-Next Bridge share exchange has yet to occur.
DISCUSSION
Petitioner Fails to Allege a Meritorious Cause of Action as Required by CPLR § 3102(c)
To obtain pre-action disclosure pursuant to CPLR § 3102, a petitioner must demonstrate it has sufficient factual basis to assert "a meritorious cause of action and [that] the information sought is material and necessary to the actionable wrong." See GTV Media Grp., Inc. v. Confidential Glob. Investigations, 205 A.D.3d 539, 539 (1st Dept 2022); see also Bishop v. Stevenson Commons Assocs., L.P., 74 A.D.3d 640, 641 (1st Dept 2022).
"Preaction disclosure is not allowed to determine whether facts supporting a cause of action exist." Gleich v. Kissinger, 111 A.D.2d 130, 131 (1st Dept 1985); Liberty Imps. v. Bourguet, 146 A.D.2d 535, 536 (1st Dept 1989); see also Bishop, 74 A.D.3d at 641; Matter of Stewart v. New York City Transit Auth., 112 A.D.2d 939, 940 (2d Dept 1985).
This limitation is "designed to prevent the initiation of troublesome and expensive procedures, based upon a mere suspicion, which may annoy and intrude upon an innocent party." Stewart, 112 A.D.2d at 940; see also Matter of Uddin v. New York City Transit Auth., 11 A.D.3d 265, 266 (1st Dept 2006).
In its moving papers, Petitioner asserts that he anticipates bringing claims for damages for stock spoofing, naked shorting, market manipulation, and fraud. While Petitioner claims he is seeking pre-action disclosure to identify prospective defendants, he also acknowledges he is seeking transaction data that he hopes will allow him to identify a basis for liability and will reveal supporting facts to permit him to plead his anticipated claim with specificity. Such a request is contrary to the purpose of CPLR § 3102.
In fact, at oral argument Petitioner's counsel acknowledged that the identity of the brokers would only be pertinent to the alleged fraud claims and that all the other causes of action required infoimation and data from the blue sheets beyond just identifying potential defendants. Based on this admission, the court need only assess whether Petitioner has asserted a meritorious cause of action for fraud.
To state a claim for fraud under New York law, a petitioner must plead "a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages." Eurycleia Partners, LP v. Seward &Kissel, 12 N.Y.3d 553, 559 (2009); see also River Ridge Living Ctr., LLC v. ADL Data Sys., Inc., 98 A.D.3d 724, 725 (2nd Dept 2012).
Petitioner does not point to any alleged misrepresentation, nor does he allege any justifiable reliance. Further, the Petition does not allege any particularized damages, and Petitioner relies on conclusory and unsupported allegations only, asserting that he suffered financial harm as a result of the "illegal" trading of MMTLP shares.
The failure to plead the elements of an alleged fraud claim is fatal to the Petition. See Dau v. 16 Sutton Place Apt. Corp., 205 A.D.3d 533, 535 (1st Dept 2022).
Courts have also consistently denied pre-action disclosure pursuant to CPLR § 3102(c) when the petition is based on speculation and suspicion. See. e.g., GTV Media Grp., 205 A.D.3d at 539-40; Bishop, 74 A.D.3d at 641; Liberty' Imps., 146 A.D.2d at 536-37; Dyer v. Cannacord Genuity LLC, 2022 NY Slip Op 34136(U)(Sup Ct, New York County Dec. 6, 2022).
Here, the allegations and arguments in the Petition are speculative and conclusory. For example, a drop in stock price is not necessarily caused by illegal activity, but Petitioner believes that the unidentified brokers are responsible in some manner for the precipitous drop of MMTLP's stock price. The Petition is therefore an improper fishing expedition, and the Petition must be denied.
WHEREFORE it is hereby:
ORDERED that the motion is denied, and the petition is dismissed; and it is further
ORDERED that, within 20 days from entry of this order, respondent shall serve a copy of this order with notice of entry on the Clerk of the General Clerk's Office (60 Centre Street, Room 119); and it is further
ORDERED that such service upon the Clerk shall be made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures for Electronically Filed Cases (accessible at the "E-Filing" page on the court's website at the address www.nycourts.gov/supctmanh);]; and it is further
ORDERED that any relief not expressly addressed has nonetheless been considered and is hereby denied; and it is further
ORDERED that this constitutes the decision and order of this court.
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