ProShares Ultra Bloomberg Crude Oil

Period: 03/06/2020 to 04/26/2020
Lead Plaintiff Deadline: 09/28/2020

SUMMARY OF CASE:

A securities class action has been filed against ProShares Ultra Bloomberg Crude Oil (UCO) on behalf of all persons and entities who purchased or otherwise acquired ProShares Ultra Bloomberg Crude Oil (“UCO”) securities between March 6, 2020 through April 26, 2020.  This case has been filed in the USDC – S.D.N.Y.

UCO is an exchange traded fund (“ETF”) purportedly designed to reflect the performance of crude oil as measured by the price of West Texas Intermediate (“WTI”) sweet, light crude oil futures contracts traded on the New York Mercantile Exchange. ETFs like UCO provide one of the primary means investors can gain exposure to fluctuations in oil prices. WTI is the main oil benchmark for North America, as it is sourced from the United States, primarily from the Permian Basin. The main delivery and price settlement point for WTI is Cushing, Oklahoma.

The Complaint alleges that UCO stated that it would achieve its investment objective by seeking daily investment results, before fees and expenses, that correspond to two times the performance of its benchmark for a single day, and not for any other period. UCO stated that it would not seek to achieve its stated objective over a period greater than a single day. However, unbeknownst to investors, extraordinary market conditions in early 2020 made UCO’s purported investment objective and strategy unfeasible. Oil demand fell precipitously as governments imposed lockdowns and businesses halted operations in response to the COVID-19 pandemic. Moreover, in early March 2020, Saudi Arabia and Russia launched an oil price war, increasing production and slashing export prices in a bid to increase the global market share of their domestic petrochemical enterprises. As excess oil supply increased and oil prices waned, the facilities available for storage in Cushing, Oklahoma approached capacity, ultimately causing a rare market dynamic known as “super contango,” in which the futures prices for oil substantially exceed the spot price. At the same time, retail investors began pouring hundreds of millions of dollars into UCO in an attempt to “buy the dip,” believing (correctly) that the price of oil would rebound as economies exited lockdown periods and the Russia/Saudi oil price war ended. Because of the nature of UCO’s investment strategy, these converging factors caused UCO to suffer exceptional losses and undermined UCO’s ability to meet its ostensible investment objective.

UCO quickly deteriorated, as a result of the nature and extent of Defendants’ fraud being revealed to investors and the market. Moreover, on April 21, 2020, UCO held a 1:25 reverse split for its shares. Ultimately, UCO suffered billions of dollars in losses and was forced to abandon its investment strategy. Through a series of rapid-fire investment overhauls, UCO was forced to transform from the passive ETF into an actively-managed fund struggling to avoid a total implosion. In April and May 2020, Defendants belatedly acknowledged the extreme threats and adverse impacts UCO had been experiencing at the time of the March offering, but which they failed to disclose to investors in a timely manner.