ProShares Short VIX Short-Term Futures ETF (SVXY)

DEFENDANT NAME: ProShares Short VIX Short-Term Futures ETF
CASE NUMBER: 1:19-cv-00886
COURT: U.S. District Court for the Southern District of New York
PRACTICE AREA: Investor Fraud
STATUS: Active
CLASS PERIOD: May 15, 2017 - Feb. 5, 2018
DATE FILED: 01/29/19
510-725-3000 [email protected]

This is a federal securities class action brought on behalf of: (1) all purchasers of ProShares Short VIX Short-Term Futures ETF (“SVXY” or the “Fund”) (NYSE Arca: SVXY) pursuant to the May 15, 2017 Registration Statement; and (2) all purchasers of SVXY between May 15, 2017 and February 5, 2018 (the “Class Period”).

SVXY is an inverse volatility exchange-traded fund (ETF) tied to the S&P 500 VIX Short-Term Futures Index (the “Index”), an investable index of VIX futures contracts. During the Class Period, SVXY was designed to achieve results for a single day that matched the inverse (-1x) of the daily performance of the Index.

Commenced on Jan. 29, 2019, the case arises from the issuer ProShares Trust II, its manager ProShares Capital Management LLC, certain of their officers and/or directors and the underwriters of SVXY’s alleged violations of the Securities Exchange Act of 1934 and the Securities Act of 1933. Specifically, Defendants misrepresented and failed to disclose that the Fund was threatened with catastrophic losses as a result of SVXY’s flawed design, the exponential growth of the Fund, the low-volatility environment, and acute liquidity risks that existed during the Class Period.

On February 5, 2018, the market learned the true risks posed by SVXY.  That day, the S&P 500 Index (“SPX”) fell 4%. This unremarkable decline, however, triggered SVXY’s concealed flaw.   In order to deliver its objective, SVXY needed to “rebalance” its portfolio by purchasing billions of dollars of VIX futures contracts, at a time when demand was heightened and supply was constrained. As the price of VIX futures contracts steadily rose, SVXY’s value precipitously  declined, resulting in a feedback loop that required the purchase of yet more VIX futures contracts by SVXY, and causing SVXY’s value to crater further. By market open on February 6, 2018, the price of SVXY shares had plummeted to a low of $11.11, a one-day decline of 90% from the prior day’s high of $107.19 per share.

On Apr. 29, 2019, the court appointed Thomas Butler, III, Anthony Ludovici and Lisa Ludovici as Lead Plaintiffs and approved their selection of Hagens Berman to serve as Co-Lead Counsel for the Class.

On September 6, 2019, Plaintiffs filed the operative Second Amended Complaint.

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