Exceed Investments targets Cboe Options Exchange in trade secrets case

Maria Nikolova

Exceed accuses Cboe Options Exchange of Fraudulent Inducement, Promissory Estoppel, Breach of Contract, Misappropriation of Trade Secrets, and violations of the Federal Defend Trade Secrets Act.

Exceed Holdings LLC doing business as Exceed Investments LLC is targeting Chicago Board Options Exchange (CBOE), now known as Cboe Options Exchange (Cboe Options), a part of Cboe Global Markets Inc (NASDAQ:CBOE), in a civil action over trade secrets disclosure. The relevant Complaint was launched on Thursday at the New York Southern District Court.

The case concerns structured notes. Given the product’s high level of complexity and specialized nature, few entrepreneurs have tried to take on the banks and create innovative structured note products. Two companies that have attempted to do so are Exceed and VEST Financial Group, Inc.

In early 2015, CBOE expressed interest in getting to know more about Exceed, with the potential goal of investing in Exceed to gain a foothold in the marketplace for structured note products. On February 24, 2015, Exceed and CBOE signed a Non-Disclosure Agreement, which states that “the parties are evaluating a potential business relationship and each party desires to share in confidence certain of such Confidential Information with the other party in connection with its evaluation of the Contemplated Relationship on the condition that Recipient provides proper safeguards to protect the Confidential Information.”

After execution of the NDA, Exceed provided CBOE with access to its internal, proprietary information, including its plans for future structured note products. Exceed set up an online data room containing all of the information CBOE requested to see, and CBOE accessed and downloaded everything from the data room.

On September 3, 2015, CBOE prepared a Term Sheet reflecting a contemplated $5 million investment by CBOE into Exceed.

On or about January 25, 2016, however, CBOE announced its investment in VEST – a competitor of Exceed. During this same period where CBOE kept promising Exceed that a deal was imminent, VEST built and launched a new structured note project that, according to the Plaintiffs, was based entirely on the proprietary approach Exceed disclosed to CBOE under the NDA.

The Plaintiffs’ Complaint alleges that “CBOE provided a mortal blow that resulted in significant damage” to Exceed.

CBOE is accused of Fraudulent Inducement, Promissory Estoppel, Breach of Contract, Misappropriation of Trade Secrets, and violations of the Federal Defend Trade Secrets Act. According to the Complaint, the amount of damages is to be determined at trial but is clearly in excess of $5 million. Under the Defend Trade Secrets Act, these damages may be tripled to an amount in excess of $15 million.

The action is captioned EXCEED HOLDINGS LLC dba EXCEED INVESTMENTS LLC v. Chicago board options exchange, incorporated (1:17-cv-08078).

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