FXCM Inc, Drew Niv and William Ahdout oppose investors’ claims in “mega lawsuit”

Maria Nikolova

Global Brokerage, Niv and Ahdout outline 46 affirmative defenses as they seek to nix claims made by investors.

The so-called “mega lawsuit” targeting Global Brokerage, Inc. formerly known as FXCM Inc. (“FXCM” or the “Company”), Dror Niv, and William Ahdout, continues at the New York Southern District Court.

The case launched by investors in FXCM securities relates to the events from February 2017, when the broker announced settlements with the US authorities in a move that led to FXCM’s exit from the US retail FX market. In response to the CFTC and NFA orders, the price of FXCM’s stock and the FXCM Notes dropped sharply, damaging investors.

The plaintiffs are pursuing claims on behalf of a class of FXCM investors under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) against FXCM; Dror Niv, FXCM’s co-founder, CEO, and Chairman of the Board; and William Ahdout, FXCM’s co-founder, Chief Dealer, Managing Director, and director.

The proposed Class is defined as:

“All persons and/or entities that purchased or otherwise acquired publicly traded Global Brokerage, Inc., f/k/a FXCM Inc. (“FXCM”) securities, including FXCM 2.25% Convertible Senior Notes due 2018 and Class A common stock, during the period March 15, 2012 through February 6, 2017, both dates inclusive”.

On May 21, 2020, Global Brokerage, Inc., Dror Niv and William Ahdout, filed their answer to the third amended complaint in this case. The defendants’ response to the complaint enlists 46 affirmative defenses.

According to the defendants, the complaint fails, in whole or in part, to state a claim upon which relief can be granted.

Furthermore, the defendants argue that the plaintiffs’ claims are barred, in whole or part, because the defendants did not make any false or misleading statements of material fact or omit to state any material facts.

Moreover, according to the defendants, the 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. The defendants insist that the 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.

Also, the defendants say that the plaintiffs’ claims against them are barred in whole or in part because of the lack of transaction causation. The actions or inactions of the defendants were not the sole or partial cause of any decision by a plaintiff to purchase FXCM shares, the defendants say.

According to the defendants, any alleged depreciation in the value of FXCM’s shares resulted from factors other than the misstatements or omissions alleged in the complaint.

Further, the defendants argue that the alleged misrepresentations are non-actionable statements that contain expressions of opinion that the plaintiffs have not alleged, and cannot prove, were not truly held.

Also, the defendants insists that at all times, they acted in good faith and in reasonable reliance upon the representations, reports, expert opinions and advice of others. 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. The defendants reiterate that they 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.

According to the defendants, the putative class period is overbroad and, therefore, many of the purported class members are not entitled to any recovery.

Let’s recall that Tony Khoury filed the first of four related shareholder actions against FXCM on February 7, 2017. In May 2017, the Court consolidated the related actions, appointed 683 Capital and Shipco as Lead Plaintiffs, and appointed the Rosen Firm as Lead Counsel. The plaintiffs filed their Consolidated Securities Class Action Complaint on June 19, 2017. The defendants moved to dismiss the first amended complaint on August 3, 2017 After briefing, the Court granted the motion to dismiss without prejudice on March 1, 2017. The plaintiffs then filed the second amended complaint on April 6, 2018. The defendants moved to dismiss the second amended complaint on May 7, 2018.

After briefing, the Court issued an Order on March 28, 2019 denying in part the defendants’ motion to dismiss as to Defendants FXCM, Niv, and Ahdout.

The Court concluded back then that the second amended complaint adequately alleges that the remaining defendants 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 Court thus denied the motion to dismiss as to FXCM, Niv, and Ahdout.

The Court determined that the second amended complaint plausibly alleges that FXCM misled investors in its public filings with respect to its purported agency-trading model, but only from the beginning of the Class Period until the end of its order flow arrangement with Effex in August 2014.

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