Plaintiff in Leucadia deal lawsuit also objects to Global Brokerage’s Chapter 11 plan

Maria Nikolova

The current language of Global Brokerage’s bankruptcy plan does not allow any recovery from the defendants in the lawsuit captioned Brett Kandell v. Dror Niv, et al.


More objections have been filed against the proposed plan for Chapter 11 bankruptcy of Global Brokerage Inc (OTCMKTS:GLBR), formerly known as FXCM Inc. After the US Trustee and the Retirement Board of the Policemen’s Annuity and Benefit Fund of Chicago submitted their objections to the confirmation of the plan, Brett Kandell, plaintiff in a lawsuit that questions the fairness of the Leucadia deal with FXCM following the events from January 15, 2015, also challenged the plan.

From the outset of this Chapter 11 Case, Brett Kandell has engaged and continues to engage in discussions with Global Brokerage Inc (also referred to as “Debtor”) to carve out the Derivative Litigation, that is the case questioning the fairness of the Leucadia deal with FXCM, of the releases and injunction contained in the Plan.

Brett Kandell believes there is an agreement in principle with Global Brokerage to permit the Derivative Litigation to ride through the Debtor’s chapter 11 case, with any recovery limited to available insurance proceeds, subject to the consent of Leucadia and the Consenting Noteholders (each as defined in the Plan) to the language to be inserted into the Plan and/or confirmation order to implement the carve-out. However this special language has not yet been finalized.

Pursuant to the Plan, Global Brokerage currently proposes to release, among myriad other claims and causes of action, any claims brought on behalf of Global Brokerage against its current and former directors and officers. The claims proposed to be released include the claims that have been or could be asserted in the Derivative Litigation.

By releasing those obviously viable and extremely valuable claims, Global Brokerage is set to forfeit the ability to recoup anything from the defendants in the Derivative Litigation, including Drew Niv, through the Debtor’s D&O insurance policies. These policies, according to Mr Kandell have aggregate limits of $75 million.

Accordingly, Mr Kandell argues, unless the Derivative Litigation is appropriately carved out of the releases and injunction contained in the Plan, the Plan should not be confirmed.

According to the Complaint, filed by Mr Kandell, a stockholder of FXCM Inc at all times relevant to this case, the Leucadia loan represented a waste of assets and the terms of the transaction were unfair to the broker.

The Delaware Court found that the plaintiff played down the urgency with which the Defendants had to act when having to decide on the potential deal. The Court, however, decided to support a review of the Leucadia transaction.

In his Memorandum Opinion issued in September last year, Vice Chancellor Glasscock stated that FXCM pursued clients “explicitly on the ground that it would hold them harmless for loss beyond investment, in contradistinction to competing FX brokers.” The Vice Chancellor inferred that the directors understood that FXCM was engaged in this policy. He also inferred that the directors were aware of the CFTC regulations prohibiting advising clients that the broker would limit trading losses.

“I find it reasonably likely that the directors knowingly condoned illegal behavior”, said Vice Chancellor Glasscock back then.

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