Global Brokerage, ex-investors disagree over possible stay of lawsuit against former top execs
Plaintiffs in “mega lawsuit” argue against the possible stay of legal proceedings against a number of former Global Brokerage senior executives, including Dror Niv, William Ahdout, David Sakhai and Eduard Yusupov.
Further to FinanceFeeds’ article about the possible stay of the legal proceedings against individual defendants in the “mega lawsuit” against Global Brokerage Inc (OTCMKTS:GLBR), formerly known as FXCM Inc, the parties in the case have voiced their opinions regarding this option. In a filing with the New York Southern District Court, seen by FinanceFeeds, the plaintiffs and the defendants clash over whether the case should proceed against Dror Niv, William Ahdout, David Sakhai, Eduard Yusupov, Janelle G. Lester, Robert Lande, Ornit Niv, Nicola Santoro, Jr., Margaret Deverell, David S. Sassoon, Kenneth Grossman, James Brown, Ryan Silverman, Arthur Gruen, Robin E. Davis, Eric LeGoff, Perry G. Fish, and Bryan Reyhani.
The “mega lawsuit” brought by former investors was already stayed against Global Brokerage after the company filed for Chapter 11 bankruptcy.
The parties now disagree over whether the stay should be extended to Global Brokerage’s former and current officers.
According to the plaintiffs, the automatic stay should not be extended to the individual defendants. The former FXCM investors note that not all of the individual defendants are currently employed at Global Brokerage so they have no participation in the company’s reorganization efforts. In addition, they insist that none of the individual defendants will be unduly distracted by defending this lawsuit because according to them, Global Brokerage’s reorganization plan is already finalized with a confirmation hearing scheduled for January 17, 2018. Accordingly, allowing the action to proceed against the individual defendants is set not to pose any risk to Global Brokerage’s reorganization.
The plaintiffs allege that the individual defendants independently violated the federal securities laws and that their liability rests upon their own actions.
Since the individual defendants face their own liability, separate from the claims against the company, they are not entitled to the automatic stay as continuing the litigation against them does not affect the company’s claims or defenses, according to the plaintiffs.
The defendants, however, disagree with this stance. They request that the Court extend the automatic stay with respect to claims asserted against Global Brokerage to the claims asserted against the individual defendants.
The defendants’ counsel notes “the anticipated, extremely short-term nature of Global Brokerage’s bankruptcy”. As a result, according to the defense, an extension of the automatic stay to the individual defendants will not cause any undue delay in this case or hardship to the plaintiffs. The stay associated with Global Brokerage’s bankruptcy filing is likely to only last another month, i.e., until the beginning of February 2018.
The defendants’ counsel argues that there is an unavoidable overlap of allegations and claims against Global Brokerage and the individual defendants. In fact, given such overlap, a finding of liability against the individual defendants could have a preclusive, collateral estoppel effect on Global Brokerage, the defendants argue.
Let’s recall that the complaint alleges that each of the individual defendants:
- directly participated in the management of the company;
- was directly involved in the day-to-day operations of the company at the highest levels;
- was privy to confidential proprietary information concerning the company and its business and operations;
- was directly or indirectly involved in drafting, producing, reviewing and/or disseminating the false and misleading statements and information;
- was directly or indirectly involved in the oversight or implementation of the company’s internal controls;
- was aware of or recklessly disregarded the fact that the false and misleading statements were being issued concerning the company; and/or
- approved or ratified these statements in violation of the federal securities laws.
In addition, Niv, Ahdout, and Lande, are alleged to have individually and in concert, directly or indirectly, disseminated or approved false statements. These defendants are accused of having violated §10(b) of the 1934 Act and Rule 10b-5 in that they “employed devices, schemes and artifices to defraud”.
The case, captioned “In re Global Brokerage, Inc. f/k/a FXCM Inc. Securities Litigation” (1:17-cv-00916), is a class action on behalf of investors in the public securities of FXCM Inc. The action is brought on behalf of a putative class consisting of all persons and entities who purchased or otherwise acquired publicly traded FXCM securities from March 15, 2012 to February 6, 2017.
The plaintiffs accuse the broker and a number of its senior executives and employees of violations under the Securities Exchange Act of 1934.
The complaint alleges that FXCM misled its clients, investors and the regulators by claiming that the company’s “No Dealing Desk” (“NDD”) platform would provide its customers with a Forex trading platform that was free of conflicts of interest. As a result of the investigations by the CFTC and NFA, the allegations and penalties, the price of FXCM’s stock dropped sharply, losing more than half of its value and damaging investors.
