The defendants are holding claims that the complaint had failed, either wholly or partly, to adequately state a claim where relief can be granted. On the 21st of May, 2020, William Ahdout, Dror Niv, and Global Brokerage Inc all filed their answer to this third-amended complaint within the case. Regardless of whether FXCM’s arrangement with Effex was standard in the industry and was in compliance with the relevant regulatory requirements, if Plaintiffs are correct, FXCM may have misled their customers by portraying such payments as order flow payments rather than as a profit-sharing arrangement with Effex, the Court ruled.
On April 6, 2018, xtb.com reviews Plaintiffs filed a second amended complaint (SAC) in this action, which the defendants now move to dismiss. The Court concludes, however, that the second amended complaint adequately alleges that the remaining defendants have committed securities fraud with respect to statements or omissions concerning FXCM’s supposed agency-trading model, the Company’s purported “order flow” payments with Effex, and Generally Accepted Accounting Principles (“GAAP”). The plaintiffs alleged the defendants committed securities fraud by misrepresenting and omitting material facts about FXCM’s secret relationship with Effex Capital, LLC. FXCM offered foreign exchange trading to retail customers, touting their “No Dealing Desk” or “agency model,” where instead of FXCM trading directly opposite the customer, FXCM connected the customer with a liquidity provider offering the best price, with FXCM merely adding a mark-up to the price as a commission. The Court concluded back then that the second amended complaint adequately alleges that the remaining defendants have committed securities fraud with respect to statements or omissions concerning FXCM’s supposed agency-trading model, the Company’s purported “order flow” payments with Effex, and Generally Accepted Accounting Principles (“GAAP”). The lead plaintiffs in this case – 683 Capital Partners, LP and Shipco Transport Inc., and named plaintiffs Sergey Regukh and Brian Armstrong, have brought this action, alleging that, from March 15, 2012 until February 6,2017, the 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.
As part ofthe pending case, the plaintiffs wanted all persons and entities whopurchased publicly listed Class A common stock of Global Brokerage, Inc.between 15 March 2012 and 6 February 2017 to be able to seek redress. According to the court documents from3 February 2023 seen by Finance Magnates, the settlement amount reached$6,500,000. It corresponds to 37% of the potential damages suffered by the investors,estimated at $17.5 million in a best-case scenario. The Settlement represents a strong result for the Class, returning approximately 37% of maximum potential damages to investors. This best-case scenario assumes that Plaintiffs prevail at trial and the Court and jury accept Plaintiffs’ damages theory, including proof of loss causation, in the full amount proffered by Plaintiffs’ expert. Anything less than a complete victory would decrease, or potentially eliminate, recoverable damages.
The CFTC issued an Order which required FXCM, Niv and Ahdout to pay a $7 million civil penalty, cease and desist from further violations of the Commodity Exchange Act and CFTC Regulations, and permanently withdraw from CFTC registration. The same day, NFA also issued an order against FXCM, Niv, Ahdout, and Niv’s sister, Ornit Niv. The Court determined that the second amended complaint plausibly alleges that FXCM misled investors in its public filings with respect to its purported agency-trading model, but only from the beginning of the Class Period until the end of its order flow arrangement with Effex in August 2014. Let’s recall that Tony Khoury filed the first of four related shareholder actions against FXCM on February 7, 2017.
The defendants went further, claiming that the plaintiffs, as well as the members of the putative class itself, all had a duty to take reasonable action. These actions entail minimizing any form of damages that they alleged had occurred as a direct result of the facts claimed within the complaint. just2trade review In the lawsuit, the proposed class of the suit is defined as any and all persons and entities that had acquired or purchased publicly traded securities from Global Brokerage, formerly FXCM. This includes the Class A common stocks, as well as FXCM 2.25% Convertible Senior Notes due 2018.
William Ahdout
It is worthrecalling that GLBR’s activities were previously part of the investigations ofthe U.S. In February 2017, the NFA and the CFTC announced settlementswith the broker, revealing for the first time the relationship that GLBR hadwith Effex. FXCM had to pay $7 million in a settlement with the CFTC and forgodomestic regulation, leaving the U.S. market. In the company’sfinancial statements, this illegal procedure was disguised as ‘payments for orderflow’, with the former Global brokerage providing unfair competitive advantagesto Effex in order to channel as much of its clients’ trading volumes to thefirm as possible. As part ofthe agreement, the defendants have denied and continue to deny any allegationsof fault, wrongdoing or damages arising from any of the conduct.
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The order and final judgment, signed by Judge Ronnie Abrams, stipulate that the settlement is fair, reasonable and adequate, and in the best interests of the Class. This Court further found that the Settlement was the result of good faith, arm’s-length negotiations between experienced counsel representing the interests of Class Representatives, Class Members, and the Individual Defendants. The “mega lawsuit” as it’s called, targeting Dror Niv, Global Brokerage Inc (Formerly known as FXCM Inc), and William Ahdout has continued within the Southern District Court of New York. No later than one week before this conference, the parties have to jointly submit a proposed case management plan and scheduling order. Earlier this week, Judge Ronnie Abrams of the New York Southern District Court signed Opinion & Order nixing the attempt of several of the defendants – FXCM, Niv, and Ahdout, to dismiss the lawsuit against them. There has been some development in the so-called “mega lawsuit” targeting Global Brokerage, Inc. f/k/a FXCM Inc. (“FXCM” or the “Company”), Dror Niv, William Ahdout, and Robert Lande.
The plaintiffs have started to pursue claims on behalf of a class of investors of FXCM, doing so under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934. This lawsuit is against FXCM itself, the co-founder, CEO, and Chairman of the Board, Dror Niv, as well as the co-founder, Chief Dealer, director, and Managing Director of FXCM, William Ahdout. That is why, according to the defendants, the plaintiffs’ motion for class certification should be denied. Finally, according to the defendants, the plaintiffs do not offer a damages methodology that ties to their theory of liability. The alleged corrective disclosure included other information that substantially altered FXCM’s financial prospects.
On June 12, 2020, FXCM, Dror Niv and William Ahdout, submitted a set of documents in opposition to the plaintiffs’ motion. Moreover, according to the defendants, the plaintiffs and members of the purported putative class at all relevant times had a duty to take reasonable action to minimize any damages allegedly sustained as a result of the facts alleged in the complaint. The defendants insist that the plaintiffs and members of the purported putative class failed to comply with that duty and are therefore barred from recovering any damages that might reasonably have been avoided. GLBR falsely represented its purported agency-trading model and its relationshipwith Effex Capital. The firm claimed to provide trading on a No Dealing Desk(NDD) model where it is not a party to the trade but only connects the retailtrader to the liquidity provider that offers the best price at the time.
- FXCM installed John Dittami, who had overseen development of the trading algorithm, to head Effex.
- Regardless of whether FXCM’s arrangement with Effex was standard in the industry and was in compliance with the relevant regulatory requirements, if Plaintiffs are correct, FXCM may have misled their customers by portraying such payments as order flow payments rather than as a profit-sharing arrangement with Effex, the Court ruled.
- In response to the orders of both the NFA and CFTC, the price of FXCM’s stocks took a sharp drop, alongside FXCM Notes, as well.
- This happens after the New York Southern District Court has granted final approval of the $6.5 million settlement reached between FXCM Inc stockholders and the defendants, including Drew Niv and William Ahdout.
- In addition, the defendants argue that all of the plaintiffs are not adequate class representatives, “having abdicated their duty to participate meaningfully in discovery”.
Former positions of William Ahdout
Yesterday, both individuals were hit with a $7.0 million fine from the Commodity and Futures Trading Commission (CFTC) for allegations of defrauding customers. Plaintiffs and defendants Dror Niv and William Ahdout have agreed to settle this action for $6,500,000. According to the defendants, the complaint fails, in whole or in part, to state a claim upon which relief can be granted.
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Itallegedly provided incomplete information and omitted material facts about itsrelationship with Effex Capital. Further, the Court finds that the plaintiffs plausibly allege that Niv and Ahdout “knew facts or had access to information suggesting” that FXCM’s portrayal of its agency-trading model and financial arrangements with Effex were “not accurate.” The plaintiffs, however, have not alleged sufficient facts to attribute scienter to Lande. Plaintiffs next allege that FXCM’s financial statements violated GAAP in at least one of two ways. First, Plaintiffs assert that these statements violated GAAP by failing to disclose that Effex was a Variable Interest Entity (“VIE”), which would have required it to consolidate this entity.
- The firm claimed to provide trading on a No Dealing Desk(NDD) model where it is not a party to the trade but only connects the retailtrader to the liquidity provider that offers the best price at the time.
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- Itallegedly provided incomplete information and omitted material facts about itsrelationship with Effex Capital.
- “All persons and/or entities that purchased or otherwise acquired publicly traded Global Brokerage, Inc., f/k/a FXCM Inc. (“FXCM”) securities, including FXCM 2.25% Convertible Senior Notes due 2018 and Class A common stock, during the period March 15, 2012 through February 6, 2017, both dates inclusive”.
KKW LLC
Through 2014, Effex had sent nearly $80 million of its trading revenue to FXCM, the plaintiffs’ complaint alleges. At the same time, FXCM had no similar arrangements with, and received no payments from, any other market maker. Furthermore, the defendants argue, with respect to both the proposed Stock and Notes Class, the proposed class representatives are all atypical as they are subject to unique defenses.
What Is Touch Trading?
According to the plaintiffs’ complaint, Effex was run by John Dittami, whom Defendants Niv and Ahdout hired at FXCM to create an internal trading system, EES, that would compete with external market makers. Dittami’s contract with FXCM provided for a split of EES’s trading profits (70% to FXCM). When FXCM’s compliance department decided that FXCM could not truthfully say it was operating an agency model if EES was trading against FXCM’s customers, Defendants decided to spin off EES as Effex. However, FXCM and Effex kept the split of trading profits—with Effex swapping in for Dittami and FXCM keeping its 70% share—which they disguised as “payments for order flow.” FXCM provided critical support to Effex for years, and Effex relied on FXCM to stay afloat. The plaintiffs brought claims against FXCM, Dror Niv, and William Ahdout under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b- 5 promulgated thereunder.
The plaintiffs allege that, for years, FXCM claimed that its “No Dealing Desk” (“NDD”) platform provided its customers with retail Forex trading that was free of conflicts of interest. Unlike other forex trading platforms, FXCM claimed that it had no financial interest in NDD trades. Instead of trading against fxprimus review its customers, FXCM purported to act merely as an agent, collecting small markups and routing customers’ trades to independent “market makers” that provided liquidity to the platform. Plaintiffs propose Shipco Transport Inc. and E-Global Trade and Finance Group, Inc., purchasers of the common stock, and 683 Capital Partners, LP, a Notes purchaser, as class representatives. The case launched by investors in FXCM securities relates to the events from February 2017, when the broker announced settlements with the US authorities in a move that led to FXCM’s exit from the US retail FX market. In response to the CFTC and NFA orders, the price of FXCM’s stock and the FXCM Notes dropped sharply, damaging investors.
