Investors sue SEC, Citadel, Jane Street over alleged market manipulation

Wall Street’s biggest market makers and the SEC are under fire in New York, accused of rigging securities prices with sophisticated trading algorithms that allegedly distort the market to their own advantage.

A new federal lawsuit filed in the Southern District of New York names Citadel Securities LLC, Virtu Financial Inc., Jane Street Group LLC, Susquehanna International Group LLP, and Invesco Ltd., alongside the Securities and Exchange Commission. The suit, brought by investor Colin Paul Sutherland, alleges these firms use automated trading systems to manipulate prices, creating artificial “voids” and “bubbles” in the market that insiders can later exploit for profit.

According to the filing, the market makers are alleged to deploy algorithms that engineer gaps in price discovery—moments when both the bid and ask prices register as zero, leaving digital markers in the order book. These markers, the suit claims, are not random but serve as signals for when the firms will reenter the market to take advantage of price levels. The plaintiff contends that this practice creates a synthetic trading environment, where insiders can profit from volatility and arbitrage opportunities generated by their own trading strategies.

The SEC, charged with maintaining fair and efficient markets, is accused of failing to investigate or disclose these algorithmic trading mechanisms. The lawsuit states that, despite having access to order-book data, the agency has not addressed these patterns, which the plaintiff alleges contradict the SEC’s mandate to ensure market efficiency.

The suit references analysis of historical tick data, which, according to the plaintiff, shows securities prices frequently follow fixed numerical sequences tied to algorithmic “magnet levels,” rather than reflecting organic trading behavior. During certain trading cycles, the algorithms are said to skip price levels, creating blank zones—voids—in the order book. These voids, the suit claims, are later revisited by the algorithms to extract value through spreads, short-term volatility, or options decay.

The filing also points to findings by the Securities and Exchange Board of India, which reportedly found that Jane Street and affiliated entities executed a similar algorithmic scheme in the Bank Nifty index. There, the alleged conduct involved purchasing underlying stock and futures in the morning to force an artificial upward index shift, then unwinding and profiting on options positions after the distortion—mirroring the process described in the U.S. case.

The legal action seeks class certification, disclosure of algorithmic trading parameters, restitution, disgorgement of profits, an injunction prohibiting the continued use of laddering and zero-marker practices, compensatory and punitive damages, and legal fees and costs.

At this stage, these are claims made in a lawsuit filed November 10, 2025, in the United States District Court, Southern District of New York. No court has made any findings of fact or liability. The case is in its initial phase and its outcome remains to be seen.

For investment professionals, the case highlights concerns about algorithmic trading and the challenges facing regulators in overseeing complex market structures. As the proceedings move forward, the industry will be watching to see how the courts and the SEC respond to the use of advanced trading technology in U.S. markets.