Unfortunately we were right: Class action law suits begin against FXCM

The abrupt end that has been brought to FXCM’s standing as one of the largest and most widely recognized retail FX brokerages in its own domestic market, the United States, has begun to take further turns.

The US authorities have banned FXCM along with its CEO Drew Niv and senior Managing Director William Adhout from operating in the United States on a permanent basis for having traded against its customers for several years whilst all the while maintaining that execution took place on an agency (A-book) basis. This may now become a matter of scrutiny for other regulators in which FXCM has operations and licenses because the execution model is global.

This morning, FinanceFeeds explained in an editorial analysis today that there may well be a deluge of litigation from two particular camps, one being the direct shareholders of FXCM, the other being shareholders of Leucadia who are now lumbered with the aftermath of a decision that was made with no due diligence having taken place and no recourse.

We pointed out that the two sets of shareholders that currently may have cause to seek retribution in court would be either shareholders of FXCM itself, a publicly listed company which has had the finger pointed at it by the New York Stock Exchange for maintaining a share price lower than $1 for a six month period after the Swiss National Bank event, $1 being the minimum share value to maintain listing on the New York Stock Exchange.

Shareholders had witnessed their stock diminish in price from $17 prior to January 2015 to just a few cents thereafter, however FXCM’s reverse stock split revitalized the prices and shareholders did not rush away in droves. FXCM eventually delisted from the NYSE and is now listed on NASDAQ, a very rare venue for stock of electronic trading companies, alluding to confidence even by NASDAQ that the company would be credible enough for its strict listing criteria.

The second possible route of discourse could come from Leucadia which is a giant North American holdings company that, through various subsidiaries, engages in telecommunications, healthcare, banking, investment services including Jefferies, which is 28% owned by Leucadia.

Leucadia has a market capitalization of over $10 billion and is known as a smaller version of Berkshire Hathaway and its shareholders and directors are absolutely nobody’s fool.

The backlash from any potential action taken by Leucadia shareholders against Leucadia for granting a $300 million emergency funding deal to FXCM without doing any due diligence, on a handshake, trusting that the structure of FXCM and its senior management team were transparent and bona fide, could be far worse than any court room tantrums from speculative FXCM shareholders.

Whilst FXCM has paid down a large proportion of the loan, Leucadia has recently taken an ownership position in FXCM, In September 2016, Leucadia took a 49.9% interest in FXCM’s operating companies, with FXCM retaining the remainder. Should this be the end of FXCM, the cost to Leucadia will be far higher than its initial interest in the firm, which will not be palatable to shareholders, who could hold the company accountable for making a reckless decision to lend $300 million in the first place, which paved the way for an interest to be taken in a firm which is now completely on its uppers, with share prices collapsing and an announcement made earlier today that 150 staff are to be made redundant.

Just half a day has passed since FXCM’s operations have begun to unravel, with trust in tatters globally, and with the end looking to be nigh, Rosen Law Firm, a global investor rights litigation specialist based in New York, has begun investigating potential securities claims on behalf of shareholders of FXCM.

Rosen Law Firm is preparing a class action lawsuit to recover losses suffered by FXCM investors and has currently gathered a series of parties wishing to be included in the claim, and is appealing for individuals or entities who purchased shares before February 6, 2017 to contact its offices.

Currently, the law firm itself is leading the claim, however it is our opinion that this will be a prevalent direction as the fate of the company spirals toward extinction.