A securities lawyer appearing on CNBC on Thursday, two days after the financial markets were shaken by a Twitter hoax, suggested that liability lawsuits—and even class actions—are now in the works as a result.
Jacob Zamansky of New York-based Zamansky & Associates, a law firm specializing in securities fraud arbitration and litigation, said he has been hearing from individual investors who “have been burned” by the market dip that occurred when an Associated Press Twitter account was hacked on Tuesday. The hackers sent out a false tweet saying that President Obama had been injured, causing a four-minute stock selloff.
According to Zamansky, investors with stop-loss orders and those on margin, lost money and have been calling his office about potential litigation.
(According to investment dictionaries, a stop-loss order is a placed with a broker to sell a security when it reaches a certain price.)
The attorney said that not only is he looking into individual cases against major brokers, but that his firm is also investigating the possibility of a class action “because people had mutual funds” that had similar stop-loss orders.
The Zamansky & Associates website says that the law firm regularly represents individual and institutional investors, and highlight’s the role which the firm played in cases related to analysts’ research and investment banking conflicts.
During the televised CNBC interview, the lawyer also had a message for the Securities and Exchange Commission, which announced earlier this month that issuers may make material disclosures through Twitter, Facebook and other social media outlets.
“I think the SEC has to stop all corporate communications through social media,” the lawyer said, noting that it’s very easy for anyone to hype a stock and manipulate the market.
Regulators have to catch up with technology, he said, also suggesting that “program algorithmic traders” bear investigation.