Optionable in Legal Limbo

Law firm Kahn Gauthier Swick says it believes there may be grounds for a class-action lawsuit against the troubled electronic trading platform Optionable (OPBL Quote).

Kahn Gauthier hasn't filed any such suit. But Canada's National Post reported Thursday that a forensic auditor hired by a former Optionable business partner found allegedly mispriced natural gas options.

An external spokesman at Optionable declined to comment, but attorney Michael Swick at KGS in New York says such a finding could merit a shareholder lawsuit.

The National Post reported that BMO (BMO Quote), the big onetime Optionable customer that suspended business with the firm this week following a huge loss on natural gas option trades, hired Deloitte & Touche to look at the firms' dealings. The Post report indicates that forensic auditors at Deloitte believe there was a discrepancy in pricing of natural gas options in which Optionable participated.

Swick says that could give shareholders of Optionable grounds for a suit against the firm, whose shares lost more than three-quarters of their value this week.

"They weren't reporting the actual trade value," says Swick, referring to the Deloitte claims reported in the National Post. "Looks to me like there was some conspiracy between Optionable and the BMO traders to hide the losses."

A BMO spokesman in Toronto declined to comment.

A discrepancy in pricing could imply that the broker, in this case Optionable, may have corroborated prices to support those that BMO placed on its natural gas options contracts, says one commodities trader.

Valhalla, N.Y.-based Optionable has had perhaps the worst week on Wall Street. After dropping 41% Wednesday, Optionable lost more than half its value Thursday to close at 85 cents. Shares traded as high as $8.63 earlier this year.

The BMO mess isn't Optionable's only headache. The New York Mercantile Exchange (NMX Quote) said Wednesday it plans to electronically trade options and futures in natural gas, crude oil, gold and silver via its CME Globex trading platform.

Nymex has a 19% stake in Optionable, which many observers believed meant that the exchange intended on either buying Optionable at some point or incorporating it into its own array of services. But Nymex's move to launch its own electronic service means that scenario is not likely. The Nymex service is expected to launch sometime in late June, according to one observer.

Nymex also has warrants to acquire up to 40% in Optionable. Those warrants are well out of the money at its current trading price.

Nymex dropped its bombshell just a day after BMO's business suspension announcement. BMO accounted for 30% of Optionable's trading revenue in the first quarter.

The situation appears to have Optionable a bit worried. It is hiring a crisis management firm and asking lawyers if it has grounds for its own suit against BMO, according to a report by Toronto's Globe & Mail.