Morrow Ni Secures a Major Arbitration Win, Cutting J.P. Morgan’s $6 Million Claim to $279k

Morrow Ni LLP is proud to announce a decisive victory in a hard-fought FINRA arbitration brought by J.P. Morgan Securities LLC.

J.P. Morgan pursued fraud and breach of contract claims and sought to recover more than $6.4 million arising out of our client’s short sale of a public company's IPO stock. After a six-day evidentiary hearing before a FINRA arbitration panel, the panel denied J.P. Morgan’s fraud claims in full and limited our client's exposure to $279,250, with each side to bear its own fees.

The case turned on concessions extracted on cross examination of JPMS’s own witnesses. During cross, we established that by the time a Regulation-SHO compliant close-out of an unlocated (i.e. no borrow) short sale was required, JPMS knew the cost of such a close-out was $279,250, yet chose to leave the position open, only later closing the position during a historic price spike at prices ranging up to roughly $1,900 per share—which resulted in JPMS’s claimed damages of over $6 million.

After six days of hearings, the panel held that every dollar of loss above the $279,250 close-out cost was the direct and foreseeable consequence of J.P. Morgan’s own decisions, and that JPMS could not recover losses caused by its own choices from Morrow Ni’s client.

This type of result is uncommon in FINRA arbitrations brought by the broker against the customer, because customers typically sign numerous contracts agreeing to pay debits incurred in the account as a result of close-outs or margin calls. This result showcases how proper cross examination can achieve extraordinary, outsize results, and reflects one of Morrow Ni’s core strengths: mastering a complex, high-stakes record and turning it into decisive advantage when it matters most—at trial.

The Morrow Ni trial team was led by a team of attorneys, Angus Ni, Serena Yang and Jing He.