Bloomberg’s Keri Geiger is reporting that New York Attorney General Eric Schneiderman will announce at 4pm ET that Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) will be sued over fraud allegations related to its Dark Pool’s preferential treatment of high-frequency traders.

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Barclays being sued by New York Attorney General

“Barclays PLC is being sued by New York’s attorney general over allegations that the bank’s dark pool gave high-frequency traders advantages over other customers, despite saying otherwise,” Bloomberg reported, quoting a person familiar with the matter.

This will be the first criminal action related to high frequency trading since Michael Lewis released the book Flash Boys, which recently rocketed to the top ten on the best seller list and Sony Pictures announced that it was producing a major motion picture from the book.

Barclays runs the largest dark pool

Barclays PLC (ADR) (NYSE:BCS) (LON:BARC) runs one of the market’s largest dark pools where stocks are traded anonymously and exchange trade rules are not published. The primary issue could be undisclosed deals that provide special access to HFT traders not available to the general market, ValueWalk sources close to the high frequency trading world indicated. These deals enable the HFT firms to receive information and quicker trading access to the market. Sources indicate they were marketed to some HFT firms as providing a rare access to the market only available on a limited basis.

“Barclays falsified marketing materials to hide how much high-frequency traders were buying and selling,” the article said, citing a person familiar with the matter who asked to not be identified because the information hasn’t been made public.

The move by New York Attorney General Schneiderman beats the US Securities and Exchange Commission to the punch, which was said to be considering charges. The Securities and Exchange Commission did say yesterday that it would test a “trade-at rule” program with the goal to place limits on the amount of trading that is conducted at non public exchanges such as dark pools. Trading at public exchanges that disclose their trading rules and generally don’t offer the same undisclosed benefits as dark pools, including the New York Stock Exchange and Nasdaq Stock Market, represents roughly 60% of US trading volume.