FINRA’s Facing Serious Legal Issues with Multiple Lawsuits Filed Against Them

FINRA's Legal Litigations 

The Financial Industry Regulatory Authority currently has multiple lawsuits against them. A lawsuit was filed against FINRA on December 12th, 2022 in the Northern District of Florida for Security Fraud. Another lawsuit was filed on February 6th, 2023 in the Central District of California for Declaratory Relief and Security Fraud. Wes Christian at Christian Levine Law Group is currently investigating a security and is expected to file a lawsuit against FINRA, Market Makers, and other Bad Actors. 

The lawsuits were introduced because FINRA halted the security MMTLP days prior to the companies record date to go private. This trapped millions of short positions and potential counterfeit shares and forced them into a private company. FINRA’s halt also took away the opportunity for investors to sell if they didn't want shares of the private company.

Multiple companies including AMC have made complaints to FINRA regarding the large amount of Failure To Delivers (FTDs) in their stock. One of the biggest complaints that caused multiple lawsuits against FINRA is from the Halt of MMTLP. Wes Christian states this security may be one of the biggest to expose counterfeit shares.

FINRA & The MMTLP Scandal

MMTLP was Meta Materials Preferred Shares. The company did not give permission to FINRA to have their preferred shares trade. It’s alleged that Market Makers and Hedge funds submitted fraudulent information to FINRA to have the security trade on the OTC Markets.

Meta Materials Merged with Torchlight Energy in June 2021, all 65,000 Torchlight shareholders upon record date received a special dividend for every share they owned. This later appeared in investors accounts as a placeholder until Torchlight's assets were sold or spun out into a private company. “It was clearly stated in the SEC approved proxy statement that the Series A Preferred shares were not to be listed or traded on any exchange”. In October 2021 the preferred shares mysteriously became tradable on the OTC Markets. The former CEO John Brda stated that fraudulent information was used and demanded the trading to stop.

Torchlight Energy was heavily shorted prior to the merger and majority of shorts didn’t close out their positions. It's alleged that hundreds of millions of counterfeit shares got transferred to the preferred shares. This is why Market Makers used fraudulent information to have the companies preferred shares trade on the OTC Markets. Short positions insisted investors to sell their shares but instead investors bought the security. After the company announced they were taking the shares private and filed multiple S1 forms the stock rose over 1,000% soaring past $12 a share.

The U3 Halt of MMTLP

The Record Date for the private company was on December 12th, and the Distribution Date was on December 14th. Brokerages told their customers the security can still be tradable on those dates and that short positions must be closed on the 9th or 12th. Multiple brokers sent statements out for force liquidations If short positions were not covered. Then FINRA halted trading prior to market open on December 9th eliminating the opportunity for shorts to cover and for investors to sell if they didn't want shares of a private company. FINRA uses the code “U3 Halt” for an extraordinary event but does not explain anything. This halt is the third U3 halt in history on an American exchange. 

“This morning, shareholders were eagerly anticipating the closure of short positions following the SEC-approved S1 document and FINRA notices. Many had held their shares for two years since the Torchlight merger, hoping for this day when shorts, especially the illegal ones, would be forced to settle their position before Nextbridge became a private company.” 

FINRA Releases a Statement 100 Days After The Halt

On March 16th, 2023 FINRA released a FAQ response to the MMTLP situation. This response is exactly 100 days after the U3 halt and is disingenuous to investors. FINRA takes fault and states the ticker had multiple coding issues involved. One coding issue is with FTD data, and the other coding issue is the official deletion of the ticker that lasted two months. 

FINRA also confirms there are still open short positions that are going to be transferred into the private company and blames the broker dealers for this occurrence. Experts say: "This is a big problem! You can't have short positions no matter if they are real or counterfeit in a private company, it's illegal."

“If FINRA truly had investors' best interests in mind, any concerns regarding the settlement and clearance process could have been addressed prior to the halt. Instead, FINRA conveniently decided to wait until December 9th, 2022, with no notice to investors, to issue a U3 halt, after the share price had been manipulated from highs of $12.50 all the way down to $2.90.” - Kurtis. Investors are asking if FINRA spoke to any Broker Dealers, Hedge Funds, or Market Makers that may have had unsettled positions in the stock prior to the halt since the price dropped dramatically a day before the U3 halt.

FINRA provides inaccurate information on how the ticker became a tradable entity. "In this case, the issuer filed with the SEC a Form S3 Registration Statement for the offering of MMTLP shares and obtained a CUSIP number." - FINRA. THIS IS INACCURATE. Torchlight filed a shelf S3 for all types of offerings, but not specific to Series A Preferred or MMTLP.  In order for this S3 registration to apply, the company would have to specifically address the Series A in a resale registration S3 and then file a subsequent take down notice once approved by the SEC for that purpose.  A CUSIP number was obtained exclusively for the purpose of distribution of the Series A Preferred Shares.

What Now? 

There are multiple lawsuits as investors are demanding FINRA to open trading for two days to allow shorts to close out their positions, and to regain their two trading days. Investors are asking their community to contact Congress, Governors, and Elected Officials on the MMTLP situation. 

The Former CEO John Brda states: "if we end up filing suit in that manner, we have what we believe are basically bulletproof items that will survive motion to dismiss, and then the discovery process starts. Discovery is a wide-open door for us to understand actually who all the bad actors are, you know broker dealers involved, market makers, hedge funds, FINRA, DTCC, everybody; everybody’s gonna get subpoenaed for their information."

Shareholders are suggesting FINRA to release the securities blue sheets to the public, or to the two companies Next Bridge Hydrocarbons and Meta Materials Inc. Blue sheet data typically include the names of individual clients, the amount of shares they traded and when the transactions occurred. This could also expose the amount of counterfeit shares in the security. If FINRA is not hiding anything they should be transparent and release this data to the public or companies. 

Many of the 65,000 investors were affected by FINRA's U3 Halt. Firefighters, Doctors, Teachers, Veterans and many more shared their story on social media:

"I can't start my family because FINRA locked my money up" 

"I'm not able to pay my mortgage and may lose my house" 

"I lost everything because of FINRA and unfortunately I can't pay my medical bills because of this"