November 30, 2020 - An amended consolidated complaint was filed.

June 19, 2020 - An investor in shares of United States Oil Fund, LP (NYSEArca: USO) filed a lawsuit in the U.S. District Court for the Southern District of New York over alleged violations of Federal Securities Laws by United States Oil Fund, LP in connection with certain allegedly false and misleading statements made between March 19, 2020 and April 28, 2020.

According to the complaint the plaintiff alleges on behalf of purchasers of United States Oil Fund, LP (NYSEArca:USO) common shares between March 19, 2020 and April 28, 2020, that the defendants violated Federal Securities Laws.

More specifically, the plaintiff alleges that the defendants stated that United States Oil Fund, LP would achieve its investment objective by investing substantially all of its portfolio assets in the near month WTI futures contract. However, unbeknownst to investors, extraordinary market conditions in early 2020 made United States Oil Fund, LP’s purported investment objective and strategy unfeasible. Oil demand fell precipitously as governments imposed lockdowns and businesses halted operations in response to the coronavirus pandemic.

In addition, 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 exceeded the spot price. At the same time, retail investors began pouring hundreds of millions of dollars into United States Oil Fund, LP 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 USO’s investment strategy, these converging factors caused the Fund to suffer exceptional losses and undermined the Fund’s ability to meet its ostensible investment objective. The plaintiff alleges that defendants, as the creators, issuers and operators of the largest oil-related ETF in existence and active market-making players in the complex commodities and futures markets that determined the Fund’s performance, possessed inside knowledge about the negative consequences to the Fund as a result of these converging adverse events.

However, rather than disclose the known impacts and risks to the Fund as a result of these exceptional threats, defendants instead commenced an offering of USO shares in March 2020, ultimately selling billions of dollars’ worth of USO shares to the market. Although the offering increased the fees payable to defendants, it also exacerbated the undisclosed risks to the Fund by magnifying trading inefficiencies and causing USO to approach position and accountability limits as a result of the Fund’s massive positions in the WTI futures market. Ultimately, the Fund suffered billions of dollars in losses and was forced to abandon its investment strategy. Through a series of rapid-fire investment overhauls, USO was forced to transform from the passive ETF designed to track spot oil prices that defendants had pitched to investors to an almost unrecognizable actively managed fund struggling to avoid a total implosion.

In April and May 2020, defendants belatedly acknowledged the extreme threats and adverse impacts that the Fund had been experiencing at the time of the March offering, but which they had failed to disclose to investors. Units of United States Oil Fund, LP (NYSEArca: USO) declined from $106.56 per unit on January 3, 2020 to as low as $16.88 per unit on April 28, 2020. On May 29, 2020, Bloomberg reported that the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission had opened probes into the United States Oil Fund, LP. According to the article, the probes concerned issues including whether shareholders were adequately informed that the ETF’s value wouldn’t necessarily move in tandem with the spot price of oil and the fund’s recent decision to purchase crude contracts that expire further out in the future.