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Wednesday, June 12, 2024 | Back issues
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Nasty Doings Alleged in Investment Business

DALLAS (CN) - A Dallas investment firm claims in court that an officer of AdvisorShares Investments falsely accused it of stealing intellectual property, costing it business.

Esposito Securities LLC sued Maryland-based AdvisorShares in Dallas County Court.

Esposito claims that the parties signed a mutual nondisclosure agreement in November 2010 and began sharing confidential, nonpublic information with each other.

But 2 months ago, Esposito says, AdvisorShares officer Dan S. Ahrens began sharing confidential information with Esposito's clients and told them not to do business with Esposito.

"Ahrens continually contacted Esposito's clients alleging false, damaging information regarding Esposito, including but not limited to, the fact that Esposito has stolen intellectual property, which is false," the complaint states.

Esposito says its president confronted Ahrens after clients told him what was happening.

"Ahrens admitted that he has contacted Esposito's clients and directed them to no longer do business with Esposito," the complaint states. "Rather, Ahrens on behalf of the defendant has been directing Esposito's clients to a competing company, Knight Securities."

Knight Securities is not a party to the lawsuit.

Esposito claims AdvisorShares violated SEC Rule 5250 by interfering with its client relationships and directing its clients to a market maker and seeding partner.

"Due to the financial incentive implicit in defendant's directing fund business to Knight Securities, defendant is placing its own financial interests in front of its fiduciary responsibility to find the most qualified broker option for the fund," Esposito claims.

Esposito provides institutional trading services for registered investment advisers, hedge funds, mutual funds, exchange-traded funds, closed-end funds and unit investment trusts with trillions of dollars in assets, according to its website.

Esposito seeks actual and punitive damages and injunctive relief for tortious interference with contracts, tortious interference with prospective contracts, breach of contract and business disparagement.

It is represented by Court Smith with Crouch Ramey of Dallas.

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