The lengthy legal battle between ETF Managers Group (ETFMG) and Nasdaq Inc. is becoming increasingly contentious. New Jersey-based ETFMG brought claims against Nasdaq in a New York federal court last week.
Last year, ETFMG removed PureFunds as the brand behind several ETFs, including the popular ETFMG Prime Cyber Security ETF (NYSEArca: HACK). ETFMG also swapped indexes on that ETF and several others to benchmarks offered by Prime Indexes.
In recent court filings, ETFMG alleges Nasdaq favored First Trust Nasdaq Cybersecurity ETF (NASDAQ: CIBR), the most direct competitor to HACK.
“All the upheaval seems to be taking its toll on HACK. The fund lost assets in each of the last five months of 2017, although its fortunes seem to have ticked up in January with $18 million flowing in, data compiled by Bloomberg show. Meanwhile, its rival, the First Trust Nasdaq Cybersecurity ETF, which goes by the symbol CIBR, has attracted inflows every month since October 2016, bringing its assets to more than $400 million,” reports Bloomberg.
In the court documents, ETFMG denies a raft of allegations, but does “admit that PureFunds and ISE/Nasdaq had certain contractual roles in developing the Disputed ETFs and deny knowledge or information sufficient to form a belief as to the amount spent by ISE and Nasdaq in connection with the Disputed ETFs.”
HACK turns four in November while CIBR will turn three in July. CIBR, the First Trust offering, now has more than $404 million in assets under management.
In the court documents, ETFMG does “admit that certain of Nasdaq’s expense obligations were satisfied through netting against ETF profits, which was necessitated by Nasdaq’s failure to make payments owed under the contracts.”
ETFMG outlines 16 defenses regarding why Nasdaq’s claims should be barred, including that ETFMG suffered more than Nasdaq, the Defendants “acted at all times with reasonable care with respect to the circumstances and events at issue,” and the claim that ETFMG has paid Nasdaq “under the Relevant Agreements, directly through appropriate set-off against amounts owed to Defendants.”