FXCM Inc says not enough potential members to form class in investors lawsuit
FXCM Inc, now known as Global Brokerage Inc (OTCMKTS:GLBR), has opposed a motion for class certification by investors suing it at the New York Southern District Court.
Let’s recall that the lead plaintiffs in this action are 683 Capital Partners, LP and Shipco Transport Inc. The 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.
Last week, the plaintiffs submitted a set of documents at the Court enlisting 35 potential class members.
On October 28, 2020, the defendants – FXCM Inc., Dror Niv, and William Ahdout, responded to the plaintiffs’ motion. According to the defendants, the Court can and should deny Plaintiffs’ Motion and request to certify a class of purchasers of FXCM’s 2.25% Convertible Senior Notes due 2018 from March 15, 2012 through February 6, 2017 (“Notes Class”).
FXCM’s key argument is that the proposed class lacks numerosity. Put otherwise, the defendants say that the number of potential class members is insufficient for the class certification. If that is so, there will be no class of FXCM Inc noteholders to sue the company and its former management.
The defendants argue that numerosity is presumed only when a class consists of forty or more plaintiffs. In their submission, the plaintiffs have identified only 35 possible members of the Notes Class and assert (without evidence) that there may be more. Given this limited number, numerosity cannot be presumed for purposes of certifying the Notes Class, the defendants say.
But more significantly, FXCM says that the plaintiffs’ figure of 35 potential members of the Notes Class is incorrect because the number of Notes holders as of the end of the proposed class period (i.e., February 6, 2017) that also signed the waiver of claims provision in the Forbearance Agreement is significantly more than five.
The defendants claim that by removing the Notes holders who have waived their claims, the number of potential members of the Notes Class is reduced from 35 to 20.
In conclusion, FXCM Inc says that the plaintiffs’ Motion for class certification should be denied.