Citadel, Virtu sued over alleged spoofing that sank Genius 22%

Grant & Eisenhofer filed a class action against Citadel Securities and Virtu Americas, alleging the market makers used spoofing to artificially depress Genius stock by 22% in a single week.

Grant & Eisenhofer P.A. filed a class action lawsuit June 29 against Citadel Securities LLC and Virtu Americas LLC, alleging the two largest US market makers executed manipulative trades that artificially deflated the price of Genius stock and inflated transaction costs for investors over a three-year period.

"The purpose of these baiting orders was to mislead other market participants about the true level of supply and demand for Genius securities, or about the stock's price volatility, thereby influencing the market price to benefit Defendants' own trading positions," according to the complaint filed in the US District Court for the Southern District of Florida. The lawsuit alleges violations of Sections 9(a) and 10(b) of the Securities Exchange Act of 1934.

During the week of Feb. 10, 2025, Citadel traded more than 23 million shares of Genius off-exchange, accounting for nearly half of all off-exchange trading in the stock, while Virtu traded almost 11 million shares, or more than 20%. Together, the two firms comprised nearly 70% of all off-exchange Genius trading that week as short volume surged from 53% to more than 61%. Genius' stock price declined 22% despite the absence of any new material, company-specific news, the complaint alleges.

The lawsuit covers all investors who purchased or sold Genius securities between April 12, 2022 and May 30, 2025. Investors seeking to serve as lead plaintiff must file a motion by Aug. 28, 2026, in accordance with the Private Securities Litigation Reform Act of 1995. The case, Aron Reynolds v. Citadel Securities LLC and Virtu Americas LLC, No. 1:26-cv-24485, could test the legal boundaries of algorithmic trading practices that have drawn increasing scrutiny from regulators.

The Spoofing Allegations

The complaint alleges that throughout the Class Period, Defendants engaged in a manipulative trading practice known as "spoofing," which involves submitting and then canceling buy or sell orders without any genuine intent to execute them. Citadel and Virtu, both registered broker-dealers with the Securities and Exchange Commission, operate as major market makers that routinely place and execute securities trades for investors as well as for their own trading accounts.

The alleged manipulation also increased investors' transaction costs by inflating the bid-ask spread for Genius stock, according to the filing. Defendants entered thousands of these baiting orders on US stock exchanges to create the false impression that Genius' stock price reflected genuine supply-and-demand and volatility dynamics, while simultaneously profiting by absorbing and reselling their customers' order flow at prices favorable to Defendants.

Market Structure Under Scrutiny

The lawsuit comes as regulators and lawmakers have intensified their examination of market-making practices and payment-for-order-flow arrangements that critics say create conflicts of interest. Citadel Securities, founded by billionaire Ken Griffin, is the largest US market maker by volume, handling roughly one in every four retail stock trades. Virtu Americas, a unit of Virtu Financial Inc., is among the top five market-making firms by market share.

The case also highlights the growing role of off-exchange trading, which now accounts for more than 40% of total US equity volume, according to data from the Financial Industry Regulatory Authority. The concentration of Genius trading among two firms during the February 2025 period — nearly 70% of all off-exchange volume — raises questions about liquidity fragmentation and price discovery in smaller-cap stocks.

Abe Alexander at Grant & Eisenhofer, who is representing the plaintiff class, declined to comment beyond the filing. Representatives for Citadel Securities and Virtu did not immediately respond to requests for comment.

This article is for informational purposes only and does not constitute investment advice.