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* Eric Schneiderman says Barclays defrauded clients
* Barclays seeks to quash subpoenas (Recasts first paragraph, adds Barclays bid to quash subpoenas)
By Jonathan Stempel
NEW YORK, Jan 21 (Reuters) - New York's top law enforcer onWednesday accused Barclays Plc of defying his subpoenasin a probe of high-speed trading in its private "dark pool," andmoved to expand his lawsuit accusing the British bank of fraud.
Barclays quickly fought back, accusing state AttorneyGeneral Eric Schneiderman of overreaching, and scrambling to fixa lawsuit that it said was fatally flawed to begin with.
In a proposed amended complaint, Schneiderman said Barclayshas refused to let its top equities electronic tradingexecutives, electronic trading chief William White and head ofproduct development David Johnsen, answer his questions eventhough both have been subpoenaed.
Schneiderman also said both men were "directly involved in,and oversaw" much of a fraud in which Barclays gavehigh-frequency traders an unfair advantage, and harmed otherclients and investors by promising to forbid the kind of"predatory" and "toxic" trading it was allowing in its darkpool.
A Feb. 11 hearing is scheduled in the New York State SupremeCourt in Manhattan over whether Schneiderman may proceed withhis amended complaint.
The presiding judge, Shirley Kornreich, last monthquestioned the strength of the original complaint, which wasfiled June 25 and which Barclays wants dismissed.
Barclays on Wednesday night moved to quash the subpoenas.
It claimed in a court filing that Schneiderman was usingthem in a "fishing expedition" to fix defects in a lawsuit thatthe proposed amended complaint "in no way cured."
The bank also denied being uncooperative in the probe,saying in a statement it will "continue to seek to cooperate"with Schneiderman even as it defends against his claims.
A spokeswoman for Schneiderman declined to comment.
Dark pools were designed to quietly trade shares beforeinvestors in the broader market could learn about and betagainst the trades. They can be cheaper to use than exchanges.
Schneiderman's lawsuit is among the highest-profile cases asregulators probe the fairness of high-speed, automated tradingpractices and alternative trading systems.
The attorney general claimed that Barclays used its darkpool to boost revenue and bonuses, and in doing so violated thestate's Martin Act, a powerful anti-fraud law.
In his amended complaint, Schneiderman said Barclays falselytold clients from 2012 to 2014 that its algorithms gave noadvantage to particular trading venues or client orders, despitehaving reprogrammed those algorithms to favor the dark pool.
He also said Barclays "did not police" that pool, tellinginvestors that 6 percent to 9 percent of trading activity was"aggressive" when it knew the amount was closer to 25 percent to30 percent.
Schneiderman also said Barclays made a false statement in anOctober court filing, when it indicated that it had banned ahigh-frequency trading firm from its dark pool in June 2012.
The attorney general said Barclays actually let the firm,GTS Securities LLC, trade millions of shares a day afterward.
A GTS spokesman did not respond to a request for comment.
The case is Schneiderman v. Barclays Capital Inc et al, NewYork State Supreme Court, New York County, No. 451391/2014. (Reporting by Jonathan Stempel; Additional reporting by KarenFreifeld and Herb Lash; Editing by Lisa Shumaker and BernardOrr)
