Life Partners Sues Schwab Unit Over Naked Short Sales
By Michael Lipkin (April 15, 2014, 9:19 PM EDT) -- Life Partners Holdings Inc. hit a Charles Schwab Corp. subsidiary with a suit in Illinois court Tuesday, alleging the brokerage, its former chief financial officer and one of its biggest customers created "counterfeit-phantom stock" through their abusive naked short-selling.
Life Partners is basing its allegations on a June U.S. Securities and Exchange Commission ruling that optionsXpress Inc. committed securities fraud by selling hundreds of millions of dollars' worth of phantom stock, including nearly $5.5 million of Life Partners shares.
The suit claims that naked short sales — where traders do not actually borrow a stock even after executing a sale —...
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