Global Brokerage Inc, formerly known as FXCM Inc, Drew Niv and William Ahdout are seeking to defend their motion for summary judgment in a lawsuit brought by FXCM Inc investors.

On January 20, 2022, the defendants in this lawsuit filed a set of documents in the New York Southern District Court, in an effort to put an end to a lawsuit that was launched back in February 2017.

This case stems from the events from February 2017, when FXCM reached settlements with the CFTC and NFA, in a move that led to its exit from the US retail FX market. The price of FXCM’s securities plummeted after the regulatory settlements were announced, thereby damaging investors in FXCM Inc.

The plaintiffs brought this class action suit against FXCM, Dror Niv and William Ahdout, alleging that, from March 15, 2012 until February 6, 2017, Defendants committed securities fraud in violation of Sections IO(b) and 20(a) of the Securities Exchange Act of 1934 and Rule l0(b)-5. Specifically, the plaintiffs allege that the defendants were responsible for false or misleading statements with respect to FXCM’s purported agency-trading model and FXCM’s relationship with another company, Effex Capital.

The plaintiffs, suing on behalf of themselves and all others similarly situated, allege that defendants violated the federal securities laws by knowingly misleading investors as to the nature of FXCM’s No Dealing Desk (NDD) platform and FXCM’s relationship with the largest market maker for its NDD platform.

On December 9, 2021, Lead Plaintiff 683 Capital Partners, LP (“683 Capital”) and Class Representatives Shipco Transport Inc. and E-Global Trade and Finance Group, Inc. submitted a memorandum of law in opposition to Defendants’ Motion for Summary Judgment. Now, the defendants have responded to the plaintiffs’ opposition.

According to the defendants, all of Plaintiffs’ claims and alleged misstatements hinge on a central premise: that FXCM and Effex were affiliated entities that had a secret 70-30 profit sharing arrangement on executed order flow as opposed to separate legal entities that had a fixed- fee, payment for order flow agreement.

But the defendants argue that the evidence in this case, including the language in the executed Services Agreement, the billed invoices, and the sworn testimony of witnesses, establishes the latter. The defendants argue that evidence establishes that they never had any ownership or management position in Effex and FXCM never received 70% of Effex’s trading profits.

According to the defendants, FXCM and Effex were distinct corporate entities that did not have a profit-sharing relationship. Thus, FXCM’s representations about its agency model and the payments it received from Effex for order flow were true, and its GAAP reporting was compliant as no consolidation of Effex was required.

Plaintiffs’ scienter arguments similarly fall flat, the defendants say, adding that the plaintiffs have presented no credible evidence demonstrating that the defendants sought to deceive investors, or even had motive to deceive investors, about its agency model or its payment for order flow agreement with Effex.

Moreover, the defendants say that the plaintiffs offer no evidence that Niv or Ahdout acted with scienter in connection with FXCM’s alleged GAAP violations. Instead, Plaintiffs rely exclusively on interpretations of two emails from FXCM employees in connection with the 2010 audit. Thhe defendants argue that this is patently insufficient to establish a material issue of fact with respect to the pivotal question of whether Defendants possessed the requisite scienter.

Lastly, according to the defendants, the plaintiffs’ loss causation and damages arguments are deficient and reliant on the analysis of an expert who has employed an unreliable methodology to reach unsupported conclusions.

The defendants conclude that their motion for summary judgment should be granted.