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Goldman Sachs is being sued by two of the co-founders of Marvell Technology (the company that makes processors for BlackBerry) over claims the bank tricked them into selling their Marvell shares “by claiming the sale was needed to cover a margin loan,” Bloomberg reports.Marvell CEO Sehat Sutardja and Marvell’s ex-COO Weili Dai — they’re married — say “they were duped into selling shares in 2008 that are now worth $141.5 million.”
They allege that Goldman pressured them to the sell all their stock based on “a regulatory rule, which didn’t exist” — a so-called ‘S.E.C Five Dollar Rule’ — and then later repurchased the shares for their own accounts. They duo says the bank did the same thing with their shares in Nvidia.
According to the complaint by the couple,
Goldman forced its clients to unnecessarily liquidate their holdings through forced margin calls, only to repurchase these same shareholdings for accounts owned by Goldman and its related hedge funds.
The couple alleges that Goldman flashed the so-called “S.E.C Five Dollar Rule” to basically coerce them into divesting their shares.
The complaint says, via Dealbook, that three years ago,
Goldman quickly moved to liquidate the pair’s Marvell holdings. Ms. Dai and Mr. Sutardja objected, asking instead that Goldman give them time to sell other less liquid holdings…
Ms. Dai and Mr. Sutardja contend that Goldman used false grounds to push the sale of the Marvell stock, telling them that a Securities and Exchange Commission rule, called the “S.E.C. Five Dollar Rule,” required Goldman to liquidate Marvell immediately.
Lawyers… argue that Goldman raised the specter of a rule to justify the firm’s decision to liquidate the Marvell holdings, rather than work with the couple to find another solution. The couple eventually sold 8.6 million shares when Marvell was trading at $6.40. The stock closed Monday at $16.05.
But the filing has no evidence that the bank then bought back those shares for their own accounts and hedge funds.