On December 1, 2022, Cohen Milstein, on behalf of plaintiff Northwest Biotherapeutics (OTCQB: NWBO), filed a securities lawsuit in the U.S. District Court for the Southern District of New York, alleging that market makers Canaccord Genuity LLC, Citadel Securities LLC, G1 Execution Services LLC, GTS Securities LLC, Instinet LLC, Lime Trading Corp., Susquehanna International Group LLP, Virtu Americas LLC, deliberately engaged in repeated manipulative spoofing of NWBO’s stock from December 5, 2017 – August 1, 2022, causing NWBO to issue more than 49 million shares at artificially depressed prices in violation of Section 10(b), Rule 10b-5 and Section 9(a)(2) of the Securities Exchange Act of 1934. Their alleged actions also constitute as fraud under New York state common law.

Case Background

NWBO is a clinical stage biotechnology company focused on the development of personalized cancer vaccines designed to treat a broad range of solid tumor cancers more effectively than current treatments, and without the side effects of chemotherapy, through a proprietary manufacturing technology which enables the Company to produce a personalized vaccine in an efficient and cost-effective manner. The Company’s lead product, DCVax®-L, received the first-ever “Promising Innovative Medicine” designation under the United Kingdom’s “Early Access to Medicines Scheme” on September 16, 2014.

NWBO recently completed a 331-patient Phase 3 clinical trial of DCVax-L in the United States, Canada, U.K., and Germany for patients with glioblastoma multiforme (“GBM”), the most aggressive and lethal form of brain cancer.

On May 10, 2022, positive top-line results from the clinical trial were presented at the Frontiers of Cancer Immunotherapy Conference of the New York Academy of Sciences, showing that DCVax-L had reached both its primary and its secondary endpoints with statistical significance under the Statistical Analysis Plan for the Phase 3 trial. The survival data of the trial was promising; no other GBM trial in decades has shown such improvements in both median survival and the “long tail” of extended survival in both newly diagnosed and recurrent (late stage) GBM patients.

Most recently, on November 17, 2022, JAMA Oncology, the highly respected, peer-reviewed cancer journal, reported that the trial results demonstrated that DCVax-L was “associated with a clinically meaningful and statistically significant extension of overall survival” and “also had an excellent safety profile and noteworthy tails of long-term survival curves.”

Despite the string of encouraging news about its lead product, NWBO’s share price has not followed suit. Quite the opposite actually—and that is not by chance. Rather, because of Defendants’ spoofing, NWBO’s share price has dropped.

Spoofing is a form of market manipulation that, in this case, was accomplished by placing “Baiting Orders” in the Limit Order Book2 or Inter-Dealer Quotation System (“IDQS”)3 that are not intended to be executed and have no legitimate economic purpose. The purpose of these Baiting Orders is to create a false illusion of market interest (either positive or negative) that will generate a response from other market participants that the spoofers can use to their advantage. For example, if the goal of the spoofing scheme is to drive the price down, the spoofer enters Baiting Orders to sell, to create an appearance of a downward trending market, which will then bait other market participants into entering their own sell orders to minimize or avoid suffering losses. Shortly thereafter, the spoofer will place orders to buy, or “Executing Purchases,” which are intended to be executed against the other market participants’ sell orders at the lower artificial prices prompted by the false Baiting Orders to sell. Immediately after placing these Executing Purchases to buy, the spoofer then cancels all of the Baiting Orders to sell, which completes the profitable spoofing cycle.

This scheme can be used multiple times during a trading day, and then repeated throughout a protracted trading period. To maximize the speed of their market access and execution of their trading strategies, spoofers typically utilize algorithmic trading programs through high-frequency trading computer systems which enable thousands of Baiting Orders to be placed in a matter of seconds and sometimes milliseconds.

During the Relevant Period, Defendants engaged in spoofing to manipulate the price of NWBO shares on OTC Link LLC and NYSE ARCA Global OTC, thus creating an imbalance in the market for NWBO shares and inducing other market participants to buy or sell at artificial prices. In order to carry out their spoofing scheme, Defendants placed tens of millions of Baiting Orders and executed millions of orders at manipulated prices during the Relevant Period. Indeed, Defendants engaged in spoofing on 395 of 1,171—or nearly 34%—of the trading days during the Relevant Period.

Plaintiff NWBO sold over 49 million shares at manipulated prices as a result of Defendants’ actions. By repeatedly and brazenly manipulating the market through their spoofing, Defendants directly impacted the price of NWBO’s shares in the market, causing Plaintiff significant losses as it sold millions of shares of NWBO stock at artificially depressed prices.

Case style: Northwest Biotherapeutics, Inc. v. Canaccord Genuity LLC, et al., Case No. 1:22-cv-10185, United States District Court for the Southern District of New York