The so-called “Mega Lawsuit” that was leveled against Global Brokerage Inc (formerly FXCM Inc) by its investors has continued within the Southern District Court of New York. It’s been several months since the plaintiffs in this case submitted their motion for class certification, but the defendants have only now filed their replies. FXCM, William Ahdout, and Dror Niv have all submitted a set of documents that stands opposed to the motion of the plaintiffs, having submitted it on the 12th of June, 2020.
The Proposed Classification
The class certification motion itself requests that it be certified under Federal Rule of Civil Procedure 23 f. This defines a class consisting the purchasers of the Class A common stock of FXCM within the period between the 15th of March, 2012, all the way to the 6th of February, 2017, with both dates inclusive. This stands known as the “Stock Class.”
The second classification is those that purchased FXCM’s 2.25% Convertible Senior Notes (referred to as the “Notes”), which were due 2018, within this same period. This will be classified as the “Notes Class.” It’s been proposed that E-Global Trade, Shipco Transport Inc, 683 capital Partners LP, and Finance Group Inc be class representatives. 683 Capital Partners were Notes purchasers, with the other aforementioned companies standing as common stock purchasers.
The Original Sin
The plaintiffs claim that FXCM had falsely claimed that its “No Dealing Desk” (NDD) platform provided its customers with retail Forex trading that had no conflicts of interest, doing so for several years. FXCM boldly claimed that it had no financial interest when it came to NDD trades, unlike other trading platforms working with FX.
The platform declared that it was just an agent, instead of trading against its customers, opting to rather collect small markups and otherwise routing the trades of their customers to independent “Market makers.” This, they claimed, provided liquidity to the platform, in turn. The plaintiffs in this case, however, have asserted that these claims were ultimately false.
It’s claimed that FXCM was, in fact, developing a high-frequency trading algorithm that traded against its unsuspecting customers within the NDDD platform. FXCM had prepared to go public with it in 2010, and its compliance department voiced serious concerns regarding this move, as it was explicitly promoting this platform as “conflict-free.” In response, FXCM spun off the trading operations to a supposedly “independent” company, Effex Capital LLC.
The defendants claim that the plaintiffs must first prove that these classes comply with Rule 23’s requirements. FXCM, William Ahdout, and Drew Niv collectively argue that the plaintiffs had not demonstrated that they satisfied all the necessary elements of Rule 23, especially so within the Notes class. The defendants claimed that they failed to meet the four elements of Rule 23(a) in regards to both the Stock and Notes Class, and even site that the Notes holders aren’t numerous enough to constitute a Class.