ARASH GHAYOORI v. COBRA TRADING, INC.
Case 2:25-cv-00021-TSZ
UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE
May 28, 2025
Thomas S. Zilly, United States District Judge
Background
Founded in 2004, Cobra operates as a retail broker providing customer service and trading tools to active stock and option traders—both institutional and retail. See Ex. C to Mot. to Confirm (docket no. 8-3).1
On or about July 6, 2021, Mr. Ghayoori created a margin trading account with Cobra, which allowed him to trade on credit. See Ghayoori Decl. at ¶ 3 (docket no. 14); see also Ex. C to Mot. to Confirm at 48–49 (docket no. 8-3). On his application for the account, Mr. Ghayoori indicated that his investment objectives included “Trading, Speculation, Growth” and “Income,” he wrote “Aggressive” as his risk tolerance, and he provided several addresses, including his physical addresses in California and Vancouver, British Columbia, and his brother‘s physical address. See Ghayoori Decl. at ¶ 3 (docket no. 14); see also Ex. E to Mot. to Confirm at 68 (docket no. 8-5). In connection with establishing a margin account with Cobra, Mr. Ghayoori agreed to the following:
You can lose more funds than you deposit in the margin account – A decline in the value of securities that are purchased on margin may require you to provide additional funds to the firm that has made the loan to avoid the forced sale of those securities or other securities in your account. The firm can force the sale of securities in your account – If the equity in your account falls below the maintenance margin requirements under the law or the firm‘s
higher “house” requirements, the firm can sell the securities in your account to cover the margin deficiency. You also will be responsible for any shortfall in the account after such a sale. The firm can sell your securities without contacting you – Some investors mistakenly believe that a firm must contact them for a margin call to be valid, and that the firm cannot liquidate securities in their accounts to meet the call unless the firm has contacted them first. This is not the case.
See Ex. B to Mot. to Confirm at 6 (docket no. 8-2).
On November 7, 2023, Mr. Ghayoori‘s account reflected a negative balance of $353,913.50 as a result of the trading activity and fund withdrawal the day prior.2 See Ex. B to Mot. to Confirm at 5 (docket no. 8-2). The parties dispute, however, whether the trading that occurred on November 6, 2023, was authorized by Mr. Ghayoori. Cobra contends that on that date, Mr. Ghayoori “shorted” the stock of MSP Recovery, Inc. by borrowing shares and selling them to buyers at market price, as he anticipated a decline in value. See Ex. C to Mot. to Confirm at 54, 70 (docket no. 8-3). Instead, the stock price rose, and Mr. Ghayoori‘s positions incurred substantial losses. See Ex. B to Mot. to Confirm at 69 (docket no. 8-2). Cobra asserts that it was required to cover the growing debt by liquidating Mr. Ghayoori‘s margin account. See Ex. C to Mot. to Confirm at 70 (docket no. 8-3). During the time the trades were being processed, Cobra contends that Mr. Ghayoori represented he needed to immediately wire $313,000.00 for a real estate transaction, and Cobra staff approved the transfer. See Ex. D to Mot. to Confirm (docket no. 8-4). As a result of the trading losses and the withdrawal, Cobra states that
Mr. Ghayoori denies that he authorized any trades on November 6, 2023. See Ghayoori Decl. at ¶¶ 5, 7 (docket no. 14). He maintains that, prior to learning of the trades, he requested a wire transfer, which Cobra staff approved. See id. at ¶¶ 4, 6. Upon discovering the trading activity, Mr. Ghayoori states that he “immediately contacted Cobra to dispute them and assert that my account had been compromised.” Id. at ¶ 8; see also Ex. F to Ghayoori Decl. (docket no. 14).
On November 16, 2023, Mr. Ghayoori sent an email to the Chief Operating Officer of Cobra, Thomas Terry, stating the trades that occurred on November 6, 2023, on his account were “unauthorized,” that he does “not have any responsibility for the negative account balance” as “it is the direct result of the unauthorized trading,” that his “phone number is no longer in service,” he has “moved to another part of the world,” and “no longer live[s] in the U[nited] S[tates].” Ex. B to Mot. to Confirm at 4–5 (docket no. 8-2).
On or about December 27, 2023, Cobra initiated arbitration proceedings against Mr. Ghayoori through the Financial Industry Regulatory Authority (“FINRA“) pursuant to the terms of the margin agreement. See Ex. C to Mot. to Confirm (docket no. 8-3). Cobra initially requested Dallas, Texas, as the venue for the arbitration proceedings
On January 3, 2024, FINRA mailed copies of the statement of the arbitration claim (the “Statement of Claim“) and related arbitration documents to both physical addresses Cobra maintained on file for Mr. Ghayoori, but the mailings were returned as undelivered. See Exs. C & E to Mot. to Confirm (docket nos. 8-3 & 8-5). On January 24, 2024, Cobra‘s counsel served the Statement of Claim and related documents on Mr. Ghayoori via the FINRA Dispute Resolution (“DR“) Portal.3 See Ex. C to Mot. to Confirm at 4 (docket no. 8-3). That same day, Cobra also emailed the materials to the same address Mr. Ghayoori used to open his account and correspond with Cobra. See id. at 8. Cobra copied Mr. Ghayoori‘s former attorney on the email, who acknowledged receipt but did not forward the materials to Mr. Ghayoori. See Ex. D to Mot. to Confirm at 4 (docket no. 8-4). The legal assistant with Cobra‘s counsel who sent the email to Mr. Ghayoori confirmed in an affidavit that the email did not “bounce-back,” and that
On May 6, 2024, Cobra filed a Motion for Determination of Service with the FINRA panel, requesting that it issue an order finding that service of the Statement of Claim and all other documents was effective, and that Mr. Ghayoori has actual notice of the proceedings and the claims against him. See Ex. E to Mot. to Confirm (docket no. 8-5). On May 9, 2024, Cobra filed a notice with the chairperson of FINRA, stating that it attempted to serve the documents relating to the Motion for Determination of Service to Mr. Ghayoori via his email address on file, but delivery was unsuccessful. See Ex. F to Mot. to Confirm (docket no. 8-6). On June 6, 2024, the FINRA panel granted the Motion for Determination of Service and found that Cobra‘s service of the Statement of Claim and other documents was “adequate, effective, and in compliance with [FINRA] Rule 12300,” and as a result, the arbitration “matter may proceed accordingly.” Ex. G to Mot. to Confirm (docket no. 8-7).
Despite the ruling in its favor, in August 2024, Cobra‘s counsel retained King International Advisory Group, Inc. (“KIAG“), an investigative agency, to locate Mr. Ghayoori and attempt to personally serve him with arbitration proceeding documents. See Ex. H to Mot. to Confirm (docket no. 8-8). Investigators at KIAG conducted a background research report and found evidence of a physical address in Toronto, Ontario, belonging to Mr. Ghayoori. Id. Two KIAG investigators visited that address on two separate occasions prior to the arbitration hearing to personally serve Mr. Ghayoori, but both attempts were unsuccessful. Id.
On January 6, 2025, Mr. Ghayoori filed a petition against Cobra pursuant to the Federal Arbitration Act, (“FAA“),
Discussion
A. Judicial Review of Arbitration Awards
Under the FAA,
B. Arbitrator Misconduct
Mr. Ghayoori contends that the Award should be vacated under
1. Notice
Under
The Court agrees that Cobra‘s methods of service complied with the FINRA Rules. Under FINRA Rule 12300(a), parties are required to use the FINRA DR Portal to serve statements of claim and other documents but are permitted to “use other means of filing or service” if an exception applies or “in other extraordinary circumstances.” In accordance with Rule 12300(a), Cobra‘s counsel served the Statement of Claim and the arbitration documents via the FINRA DR Portal, and Cobra served the same documents by email to the address Mr. Ghayoori used to open his margin account and correspond
Cobra‘s service also complies with constitutional due process. “Due process requires notice reasonably calculated, under all the circumstances, to apprise parties of the pendency of the action and afford them an opportunity to present their objections.” United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 272 (2010) (internal quotation marks omitted). “Due process does not require actual notice.” Id. (quoting Jones v. Flowers, 547 U.S. 220, 225 (2006) (cleaned up)). Although Mr. Ghayoori claims that the documents were sent to a “defunct” email address, the email did not bounce, and Cobra‘s IT department confirmed successful delivery. See Ex. E to Mot. to Confirm (docket no. 8-5). Cobra also sent the materials to Mr. Ghayoori‘s former attorney, who acknowledged receipt. See Ex. D to Mot. to Confirm (docket no. 8-4). Mr. Ghayoori
The Court is limited to reviewing the Award on the narrow grounds set forth in the FAA and may not second-guess the panel‘s factual or legal conclusions. See Kyocera, 341 F.3d at 994, 998 (holding that, under the FAA, courts are afforded “an extremely limited review authority” and “neither erroneous legal conclusions or unsubstantiated factual findings justify federal court review” of an arbitration award). On May 6, 2024, Cobra moved the panel for a determination that its service upon Mr. Ghayoori was effective under FINRA Rule 12300. The panel granted the Motion for Determination of Service, stating:
Based on the panel‘s review of the pleadings and documents noted above, and FINRA Rule 12300, the panel finds Claimant‘s service of the Statement of Claim and other documents and pleadings referenced in its motion was adequate, effective, and in compliance with Rule 12300. Therefore, IT IS
ORDERED claimant‘s motion for Determination of Service is granted. This matter may proceed accordingly.
Ex. G (FINRA Order) to Mot. to Confirm (docket no. 8-7).
Nothing in the record suggests that the panel‘s ruling was the result of misconduct or legal error. The Court finds no basis to disturb the panel‘s determination, and vacatur is not warranted based on inadequate notice under
2. Venue
Mr. Ghayoori also argues that the Award should be vacated under
Mr. Ghayoori fails to articulate any prejudice or provide any authority supporting his objection to venue. According to FINRA Rule 12213(a)(1), the FINRA Director selects the arbitration hearing location, and generally “will select the hearing location closest to the customer‘s residence at the time” the events occurred that gave rise to the dispute. When Mr. Ghayoori opened his margin account with Cobra, he provided two physical addresses for himself, one in Studio City, California, and one in Vancouver, British Columbia. See Ex. C to Mot. to Confirm (docket no. 8-3). Because Mr. Ghayoori resided in Vancouver during the relevant time period, FINRA selected Seattle, not Dallas,
C. Manifest Disregard of the Law
Mr. Ghayoori also alleges that the Award should be vacated pursuant to
Here, Mr. Ghayoori makes no showing that the FINRA panel acted irrationally or intentionally disregarded governing law. The record reflects that the panel was duly appointed pursuant to the parties’ agreement and the FINRA Rules, and that it conducted proceedings in which it considered evidence, admitted exhibits, and held hearings before issuing the Award.
Accordingly, the Court concludes that Mr. Ghayoori has not shown that the arbitrators exceeded their powers or manifestly disregarded the law. Vacatur is not warranted under
D. Mr. Ghayoori‘s Remaining Arguments in the Cross Motion to Vacate
Mr. Ghayoori raises several additional arguments in support of vacatur, none of which have merit.
First, Mr. Ghayoori contends that the Award constitutes a default judgment and is therefore unenforceable. See Cross Mot. to Vacate at 18 (docket no. 13). This argument is contradicted by the record. The record shows that the FINRA panel admitted evidence and issued a reasoned award. The absence of Mr. Ghayoori‘s participation in the proceedings does not render the Award ineffective.
Third, Mr. Ghayoori asserts that Cobra waived its right to rely on the Award by asserting a counterclaim in this action. See Cross Mot. to Vacate at 22 (docket no. 13). This assertion is also without merit. The counterclaim merely reiterates the request for confirmation and incorporates the arbitration record. See Answer and Counterclaim at 20-25 (docket no. 6). It does not constitute waiver or an attempt to pursue duplicative relief.
Fourth, Mr. Ghayoori argues the FINRA panel made “cumulative errors” and that “policy considerations” support vacating the Award. See Cross Mot. to Vacate at 15–16 (docket no. 13). He contends that the Court, by affirming the Award, “would undermine both the letter and spirit of the Federal Arbitration Act” and “encourage[] forum-shopping through selection of arbitration venues with no discernible connection to the dispute.” Id. Vacating the Award, Mr. Ghayoori argues, would “preserve the integrity of the arbitration process.” Id. at 16. The Court finds no support in the record for these assertions. As discussed above, the Court‘s review of arbitral decisions is extremely limited under the FAA, and there is no evidence of misconduct, unfairness, or misapplication of governing rules. To the extent Mr. Ghayoori invokes general concerns
Finally, Mr. Ghayoori also seeks a 60-day continuance, citing both an unspecified scheduling conflict and a desire to conduct discovery related to the arbitration. See Cross Mot. to Vacate at 23–24 (docket no. 13). Mr. Ghayoori fails to identify any specific scheduling conflict or explain how it prevents him from responding to the legal issues presented, all of which are briefed and turn on the existing record. As to discovery, because the Court independently concludes that both service and venue were proper, and that the panel neither exceeded its authority nor acted in manifest disregard of the law, discovery is unnecessary. Mr. Ghayoori identifies no facts that would alter these findings. Accordingly, his request for a continuance is DENIED.7
Conclusion
For the foregoing reasons, the Court ORDERS:
- Cobra‘s Motion to Confirm the Arbitration Award, docket no. 8, is GRANTED;
Mr. Ghayoori‘s Petition to Vacate the Arbitration Award, docket no. 1, is DENIED; - The Court hereby CONFIRMS the FINRA panel‘s Award; and
- The Clerk is directed to send a copy of this Order to all counsel of record, to enter judgment confirming the Award, and close this case.
IT IS SO ORDERED.
Dated this 28th day of May, 2025.
Thomas S. Zilly
United States District Judge
