March 12, 2018


First-of-its-kind litigation seeks to uncover key players in widespread price rigging of VIX futures and options

CHICAGO, IL – As controversy surrounding the CBOE Volatility Index (“VIX Index”) continues to grow, a new federal class action lawsuit filed late Friday alleges widespread manipulation of the VIX futures and options market, resulting in hundreds of millions of dollars in losses for investors across the country. The litigation, filed on behalf of investors damaged by this manipulation, is the first lawsuit concerning this market manipulation to allege violations of the Commodity Exchange Act, which prohibits market participants from improperly influencing the price of commodity futures. Furthermore, the named plaintiff and its counsel signaled their intention to issue a third-party subpoena to the Chicago Board Options Exchange, publisher of the VIX index and the only source of information for identifying the unnamed traders and transactions involved in the alleged market manipulation. The named plaintiff is being represented by Cafferty Clobes Meriwether & Sprengel LLP and Cohen Milstein Sellers & Toll PLLC.

“The health of our financial system and the stability of our markets depends on the trustworthiness of their institutions,” said Michael Eisenkraft, co-counsel for the named plaintiff and putative class and a Partner in Cohen Milstein’s Securities Litigation and Investor Protection practice. “By manipulating the VIX derivative market, the defendants not only profited off their deceit at the expense of honest investors, but damaged the integrity of an entire industry.”

According to the complaint filed in the U.S. District Court for the Northern District of Illinois, unnamed traders were able to rig the market for VIX futures and options by manipulating the process in which the contract’s settlement price – used to determine their value at settlement – was calculated at the time of the contract’s expiration. The lawsuit alleges this was done by aggressively transacting in a key determinant of a VIX derivative’s settlement value -- S&P 500 Index (SPX) options -- ahead of the settlement auction, thereby manipulating the value of VIX futures and options.

“By bringing this case forward and seeking to expose those who were involved in this scheme, we hope to bring a measure of justice to all those impacted and restore confidence in our financial infrastructure,” said Anthony Fata, co-counsel for the named plaintiff and putative class and a Partner at Cafferty Clobes Meriwether & Sprengel LLP.

Published by the Chicago Board Options Exchange (CBOE), the Volatility Index (VIX Index) – often referred to as the “fear gauge” -- attempts to measure the 30-day implied volatility of the market. The VIX Index is based on the S&P 500, the core index for U.S. equities, and calculates expected volatility by averaging the price of put and call options over a wide range of contract terms. In 2004, CBOE introduced the first futures and options for the VIX Index, fueling a dramatic rise in trading volume that continues to this day.

However, according to the lawsuit, the unique and complex way in which the settlement price – and therefore the value – of an expiring VIX future or option is determined has left the market extremely susceptible to manipulation. The complaint cites research from University of Texas academics which points out that, unlike other index derivatives which derive their value from the price of their underlying assets, VIX futures and options are subject to a hybrid auctioning process on expiration date that is largely affected by another class of instruments, namely SPX options. The unique structure, according to the researchers, leaves the market much more vulnerable to manipulation, as traders can influence the final settlement price of VIX derivatives by making transactions that distort the value of relatively thinly traded SPX options.

The lawsuit alleges the manipulation scheme identified by the UT researches was put into effect no later than 2011. It also cites recent settlement prices reportedly showing abnormal spikes in VIX future and options prices, including one session in January 2018 in which the settlement price jumped from $11.76 to $12.81 in the final day of trading before expiration, marking the fourth largest price swing over more than 160 days of trading. According to the lawsuit, this market manipulation led to the transfer of more than $42 million among contract holders.

The lawsuit calls for the certification of a class to represent all similarly-situated investors as well as damages and relief related to losses sustained as a result of market manipulation and legal fees. The named plaintiff is being represented by Anthony Fata and Daniel Herrera of Cafferty Clobes Meriwether and Sprengel LLP as well as Michael Eisenkraft and Carol Gilden of Cohen Milstein Sellers & Toll PLLC.

About Cohen Milstein:

Cohen Milstein Sellers & Toll PLLC is recognized as one of the premier law firms in the country handling major, complex plaintiff-side litigation. With more than 90 attorneys, Cohen Milstein has offices in Washington, D.C., Chicago, Ill., New York, N.Y., Palm Beach Gardens, Fla., Philadelphia, Pa., and Raleigh, N.C. For additional information, visit or call 877.515.7955.

About Cafferty Clobes:

Cafferty Clobes Meriwether & Sprengel LLP, which has offices in Chicago, Philadelphia, and Ann Arbor, combines the diverse talents of attorneys with a wide range of litigation experience.  Since its founding in 1992, the firm has focused on representing plaintiffs, such as investors, employees, consumers and companies, in complex civil litigation throughout the country.  For additional information, visit or call 312.782.4880.