Global Brokerage, ex-FXCM Inc, faces objections to attempt to close bankruptcy case
Shareholder Brett Kandell says the broker and its former execs are frustrating a derivative litigation which questioned the rationale behind FXCM’s deal with Leucadia over a $300m loan.
The attempts of Global Brokerage Inc (OTCMKTS:GLBR), formerly known as FXCM Inc, to officially close its Chapter 11 case are facing objections.
On Monday, June 11, 2018, Brett Kandell, a former stockholder of FXCM Inc, filed his objection to the motion of the broker to close the bankruptcy case. According to Kandell, he is being prevented from proceeding with his derivative litigation.
Let’s recall that Mr Kandell, derivatively on behalf of nominal defendant FXCM Inc., targets a number of FXCM directors, including Drew Niv, William Ahdout, Kenneth Grossman, David Sakhai, Eduard Yusupov, James G. Brown, Robin Davis, Perry Fish, Arthur Gruen, Eric LeGoff, Bryan Reyhani, and Ryan Silverman. According to Mr Kandell’s complaint, the Leucadia loan to FXCM represented a waste of assets and the terms of the transaction were unfair to the broker.
In September last year, the Court supported a review of the Leucadia transaction.
“I have found it reasonably conceivable that entire fairness review is invoked here. Under that standard of review, it is appropriate that I examine the transaction with a full record”, said Vice Chancellor Glasscock.
During the bankruptcy case of FXCM Inc (now known as Global Brokerage Inc), Kandell was granted derivative standing, with the express consent of Global Brokerage through heavily negotiated language in the Confirmation Order, to stand in the shoes of the broker to continue to prosecute the Derivative Litigation against the non-Debtor defendants therein. That is, the derivative litigation was allowed to proceed against FXCM’s directors.
But Mr Kandell says this effort has been hampered. In his latest filings with the Court, Mr Kandell says:
“However, recent actions by the Debtor, apparently in concert with the non-Debtor Defendants, have frustrated the purpose and intent of the Confirmation Order in allowing the Derivative Plaintiff to prosecute the Derivative Litigation on the Debtor’s behalf and for the Debtor’s benefit (and therefore, for the benefit of the Debtor’s stakeholders)”.
Put otherwise, the directors of FXCM Inc (the so-called non-Debtor defendants) and the broker are allegedly preventing Mr Kandell from proceeding with the derivative lawsuit.
In particular, counsel for the non-Debtor defendants, the same law firm that represents the Debtor, has attempted to assert the Debtor’s attorney-client privilege with respect to documents belonging to the Debtor but in the possession of the non-Debtor individual defendants and/or their counsel. This assertion of privilege, which Mr Kandell disputes, is antithetical to the consensual grant of derivative standing to him.
Kandell proposes that a hearing be held on the matter on July 5, 2018.
