Something was amiss when Erich Brehm checked his TVIX holdings late last week.

The VelocityShares Daily 2x VIX Short-Term exchange-traded note, which trades under the symbol TVIX, shed half its market value between Thursday and Friday, a tumble that spooked investors and underscored the complexities of easy-to-trade securities tied to volatility.

"Something weird happened last week and the market value got cut in half. It happened for some reason that none of us understand," said Brehm, 59, owner of a medical supply distribution business in Sunnyvale, Texas, who said he bought 2,200 TVIX shares for $17.30 each back on Feb. 22.

On Wednesday, TVIX rose 15% to $8.02.

Last week's price crash capped a month of anomalous moves in the TVIX after new issuance dried up.

Credit Suisse AG (CS), the bank that issues TVIX shares, suspended new creation after a rush of demand. The suspension prompted the price of TVIX to drift far from the basket of assets it was meant to track. Prior to the temporary suspension, its price tracked closely with its underlying index, which is tied to futures on the Chicago Board Options Exchange Volatility Index.

In a two-sentence press release on Feb. 21, the bank said it would cease to create new units of TVIX "due to internal limits on the size of the ETNs." More than $640 million had flowed into the fund during the first seven weeks of the year, up from just over $100 million to start the year, according to global research and advisory firm XTF.

The halt triggered a supply-demand imbalance.

Credit Suisse spokeswoman Katherine Herring declined to comment.

"The fact that Credit Suisse stopped issuing the notes meant that the tie with the net asset value was gone," said Ralph Edwards, director of derivatives strategy at ITG, meaning that the market price of TVIX drifted above intrinsic value, or higher than where the price would be if shares could be created and redeemed.

TVIX is packaged to deliver juiced-up returns for investors looking to hedge against stock-portfolio declines. Its price is meant to double daily returns on futures on the Chicago Board Options Exchange Volatility Index, or VIX, and rise when stocks fall. Over the last 12 months, the TVIX moved an average of 6.7% daily in either direction. So far in 2012, the TVIX is down 75% so far this year.

Many investors were both unaware that external forces were influencing TVIX, and that an influx in new creations would likely compress the price, which last week rose to nearly double its intrinsic value. The ETN closed at $14.43 on March 21, 89% higher than its $7.62 net asset value, according to FactSet Research.

A day later, on March 22, the TVIX dropped 29%, amid by heavy short-selling activity. Short sellers borrow shares from other investors and sell them in the hope of buying them back at a lower price later.

The timing proved auspicious. Hours after the market closed on Thursday, Credit Suisse said it would reopen new issuance of shares the following day.

TVIX plunged another 30% on Friday, as additional supply weighed down the market price of the ETN.

Data show that some investors started betting on an eventual slide in TVIX immediately after creation was halted last month, and that short-selling accelerated price declines.

"Short sellers immediately began borrowing hundreds of thousands of shares to profit from the assumed eventual reversion to the mean, or reduction in premium," said Andrew Shinn, director of research at SunGard's Astec Analytics unit in New York.

Following last month's halt, the number of TVIX shares borrowed by short sellers nearly quadrupled overnight, from nearly 600,000 on Feb. 21, to just over 2.2 million a day later, according to Data Explorers. By March 22, the number of borrowed shares had jumped to 4.1 million.

Securities and Exchange Commission spokeswoman Florence Harmon declined to comment on whether the SEC was looking into any unusual trading of TVIX.

While frustration was widespread, the risks are outlined in the fund's investment materials.

"The [net asset value] disengaged from the reality, and Credit Suisse essentially turned it into a closed-end fund," said Bill Singer, partner at the law firm Herskovits PLLC, noting that recent TVIX performance appears to be consistent with the fund's disclaimers.

"The market price of your ETNs may be influenced by many unpredictable factors," including "supply and demand," according to the TVIX prospectus.

For other volatility-linked products "there will be greater scrutiny going forward," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

"If you read the fine print, maybe a lot of people who were trading this really shouldn't have," Detrick said. "The TVIX soured a lot of people toward these instruments and there are a lot of people who are still losing confidence in some of these more arcane Wall Street instruments."

-By Chris Dieterich, Dow Jones Newswires; 212-416-2611; christopher.dieterich@dowjones.com