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Nasdaq Alleges ETF Servicing Firm Schemed to Unlawfully Take Over Line of Funds

A lawsuit by Nasdaq, Inc. against a 1940-Act registered firm and other entities claims the defendants initiated a scheme to take over a line of ETFs and keep the profits. According to the complaint, Nasdaq’s predecessor in interest, International Securities Exchange partnered with an entity to develop and launch a line of ETFs under the PureFunds brand. ISE and PureFunds then hired ETF Managers Group, LLC and other entities to run the ETFs’ operations and the defendants were contractually required to convey to ISE (and post-acquisition, Nasdaq) and PureFunds the profits from the funds. Nasdaq claimed that beginning in late 2016, the defendants fabricated frivolous legal claims that they used to terminate certain agreements with Nasdaq and PureFunds in an attempt to unlawfully steal the PureFunds ETFs.  ETF Managers Group responded with a statement that accuses Nasdaq of not honoring its contractual obligations to ETF Managers Group under the parties’ agreements and behaving in a manner that undermined the cooperative and productive relationships that had previously existed among the parties. ETF Managers Group also released correspondence detailing the breakdown of the relationship among the parties, including acrimonious conflict with a former member of the board.