FXCM, Drew Niv and William Ahdout strike back in “mega lawsuit”

After a short delay, Global Brokerage, Inc. formerly known as FXCM Inc., Dror Niv, and William Ahdout have filed their answer and defenses in the so-called “mega lawsuit” brought by stockholders of FXCM Inc. 

The lead plaintiffs in this case – 683 Capital Partners, LP and Shipco Transport Inc., and named plaintiffs Sergey Regukh and Brian Armstrong, have brought this action, alleging that, from March 15, 2012 until February 6, 2017, the defendants committed securities fraud in violation of Sections IO(b) and 20(a) of the Securities Exchange Act of 1934 and Rule l0(b)-5. Specifically, the plaintiffs allege that the defendants were responsible for false or misleading statements with respect to the company’s purported agency-trading model and FXCM’s relationship with another company, Effex.

On March 28, 2019, the Court concluded that the second amended complaint adequately alleges that FXCM, Niv and Ahdout have committed securities fraud with respect to statements or omissions concerning FXCM’s supposed agency-trading model, the Company’s purported “order flow” payments with Effex, and Generally Accepted Accounting Principles (“GAAP”).

The defendants filed their answer with the New York Southern District Court on May 13, 2019. The document, seen by FinanceFeeds, enlists 46 affirmative defenses. Let’s note that the statements contained in the affirmative defenses are merely statements – at this point, there are no arguments supporting these statements, nor are there any details regarding these statements.

Let’s mention some of these affirmative defenses:

• ELEVENTH AFFIRMATIVE DEFENSE

Plaintiffs’ claims are barred, in whole or part, because Plaintiffs and members of the purported class had actual or constructive knowledge of the acts and omissions complained of and therefore assumed the risk of any alleged damages proximately caused thereby.

• TWELFTH AFFIRMATIVE DEFENSE

Plaintiffs’ claims are barred, in whole or part, because of the contribution of or the comparative fault and contributory negligence of Plaintiffs or other entities or persons.

• THIRTEENTH AFFIRMATIVE DEFENSE

Plaintiffs’ claims are barred in whole or in part by Plaintiffs’ own actions, omissions and/or negligence.

…

• SEVENTEENTH AFFIRMATIVE DEFENSE

Plaintiffs and members of the purported putative class at all relevant times had a duty to take reasonable action to minimize any damages allegedly sustained as a result of the facts alleged in the Complaint. Plaintiffs and members of the purported putative class failed to comply with that duty and are therefore barred from recovering any damages that might reasonably have been avoided.

• TWENTY-SECOND AFFIRMATIVE DEFENSE

Plaintiffs’ claims are barred because Plaintiffs have failed to allege, and have not suffered, any cognizable injury attributable, in whole or in part, to any conduct by Defendants. Any damages which Plaintiffs seek to recover against the Defendants were in fact caused by actions or omissions of Plaintiffs and members of the purported putative class and/or third parties.

Here are a couple of defenses regarding the alleged misstatements made by the defendants:

• TWENTY-FIFTH AFFIRMATIVE DEFENSE

Plaintiffs’ claims against Defendants are barred, in whole or in part, because the alleged misstatements were mere puffery or were vague statements of optimism.

• TWENTY-SIXTH AFFIRMATIVE DEFENSE

The claims are barred, in whole or in part, because the alleged misrepresentations are non-actionable statements that contain expressions of opinion that Plaintiffs have not alleged, and cannot prove, were not truly held.

Finally, the defendants argue that they at all times acted in good faith and in reasonable reliance upon the representations, reports, expert opinions and advice of others. They insist they were entitled to, and did, rely upon representations, reports, expert opinions and advice of others in affixing their signatures to, and authorizing the public filings at issue.

“They believed that those individuals upon whose representations, reports, expert opinions and advice they relied were, in fact, expert in their field and were competent to render the opinions they had provide. Defendants had no notice, and had no reasonable grounds to believe, that the representations, reports, expert opinions and advice provided were in any way inadequate, unfounded or incorrect”.