Direxion is a financial services company, primarily known for its leveraged ETFs.

According to a press release dated September 18, 2009, the Complaint alleges the Defendants violated the Securities Act by failing to disclose that the FAZ Fund is altogether defective as a directional investment play. Defendants failed to disclose the following risks in the Company's Registration Statement: (1) inverse correlation between the FAZ Fund and the RFSI over time would only happen in the rarest of circumstances, and inadvertently, if at all; (2) the extent to which performance of the FAZ Fund would inevitably diverge from the performance of the RFSI -- i.e., the probability, if not certainty, of spectacular tracking error; (3) the severe consequences of high market volatility on the FAZ Fund's investment objectives and performance; (4) the severe consequences of inherent path dependency in periods of high market volatility on the FAZ Fund's performance; (5) the role the FAZ Fund plays in increasing market volatility, particularly in the last hour of trading; (6) the consequences of the FAZ Fund's daily hedge adjustment always going in the same direction as the movement of the underlying index, notwithstanding that it is an inverse leveraged ETF; (7) the FAZ Fund causes dislocations in the stock market; and (8) the FAZ Fund offers a seemingly straightforward way to obtain desired exposure, but such exposure is not attainable through the FAZ Fund.

The FAZ Fund seeks investment results that correspond to three times the inverse (-300%) daily performance of the Russell 1000 Financial Services Index ("RFSI"), which measures the performance of the financial services sector of the U.S. equity market.

The Direxion: ERY Fund also filed in the Southern District of New York, captioned: Howard Schwack, et al. v. Direxion Shares ETF Trust, et al., file number: 10-CV-00271, occurred as follows:

According to the press release dated January 13, 2010, the Complaint alleges that given the spectacular tracking error between the performance of the Energy Bear Fund and its benchmark index, the fact that Plaintiff and the Class sought to protect their assets by investing their monies on the correct directional play has been rendered meaningless. The Energy Bear Fund is, therefore, the equivalent of a defective product. The Energy Bear Fund did not do what it was designed to do, represented to do, or advertised to do.

Direxion Shares’ Registration Statement did not disclose that the Energy Bear Fund is altogether defective as a directional investment play; it did not track three times the inverse of the Russell Energy Index on a daily basis, nor for periods longer than one trading day. In order to sufficiently and accurately disclose this counterintuitive reality, the Registration Statement would have had to clearly explain that, notwithstanding the name of the Energy Bear Fund, the investment objective of the Energy Bear Fund and the purpose of Direxion Shares’ ETFs generally, the Energy Bear Fund would perform precisely the opposite of investors’ reasonable expectations.

In ignorance of the false and misleading nature of the statements described in the Complaint, Plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of the Energy Bear Fund shares. Had Plaintiff and the other members of the Class known the truth, they would not have purchased said shares, or would not have purchased them at the inflated prices that were paid.

On August 16, 2010, a Corrected Memorandum Opinion and Order was issued by the Court consolidating the cases under one master file and appointed Evan Stoopler as lead Plaintiff, and Federman & Sherwood as lead Counsel, to represent holders of the FAZ Fund. The Court also appointed Howard Schwack and William Lee as co-lead Plaintiffs, and Wolf Haldenstein Adler Freeman & Herz LLP and Gilman and Pastor LLP were appointed as co-lead Counsel, to represent holders of the ERY Fund.

On November 23, 2010, a First Consolidated Amended Class Action Complaint was filed by the lead Plaintiffs against the Defendants. The Plaintiffs filed a Second Consolidated Amended Class Action Complaint on April 8, 2011.

On March 6, 2012, the Court issued a Memorandum Opinion & Order denying Defendants' motion to dismiss the third consolidated amended Complaint.

On July 24, 2012, certain Plaintiffs agreed to a stipulation dismissing the action against the Defendant Direxion Shares ETF Trust and all other named Defendants without prejudice pursuant to Federal Rule of Civil Procedure 41 (a)(1)(2). The claims of the other Plaintiffs remain, and this action is pending with respect to those claims.

On November 8, 2012, the Court issued an Order denying Defendants' motion for a stay or, in the alternative, for an order certifying the motion to dismiss orders for interlocutory appeal.

On January 31, 2013, the parties entered into a Stipulation of Settlement. This proposed Settlement was preliminarily approved by the Court on February 5. On May 10, the Court issued a Final Judgment and ordered this case dismissed with prejudice, and also awarded attorney's fees and expenses.