Global Brokerage Inc, previously known as FXCM Inc, and the plaintiffs in a securities class action claim that additional time is needed to negotiate a settlement. This is evident from a letter filed by Global Brokerage on January 26, 2023, with the New York Southern District Court.
The parties in this dispute seek an extension of one week, until February 3, 2023, for submitting the Stipulation of Settlement and a petition for preliminary approval of the settlement. This is the second request for a time extension. The initial request was granted by the Court, and the current deadline is January 27, 2023. Although significant progress has been achieved, and the parties are on the verge of addressing the main concerns affecting the settlement, more time is required to finish the settlement papers.
Because of the parties' agreement in principle to settle this matter, the securities class action against Global Brokerage, Inc., previously known as FXCM, Inc., Dror Niv, and William Ahdout has been staying since December 23, 2022.
Let us remember that the plaintiffs, in this case, include (among others): 683 Capital Partners, LP the lead plaintiff, while Shipco Transport Inc. and E-Global Trade and Finance Group, Inc. are class representatives.
Plaintiffs sue 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 established thereunder. Shipco and E-Global file claims on behalf of themselves and a certified Class that includes “all persons and/or entities who purchased or otherwise acquired publicly traded Global Brokerage, Inc., f/k/a FXCM Inc. (”FXCM“) Class A common stock between March 15, 2012, and February 6, 2017, both dates inclusive.” 683 Capital brings its claims one at a time.
The plaintiffs claimed that the defendants engaged in securities fraud by misrepresenting and omitting significant information concerning FXCM's covert connection with Effex Capital, LLC. FXCM provided foreign currency trading to retail consumers, advertising their “No Dealing Desk” or “agency model,” in which FXCM linked the user with a liquidity provider delivering the best price, with FXCM simply adding a mark-up to the price as a fee.
According to the plaintiffs, FXCM was surreptitiously collecting kickbacks of around 70% of trading profits from Effex, one of FXCM's key liquidity suppliers who was trading against FXCM's clients, unknown to FXCM's customers and investors.
Effex was headed by John Dittami, whom Defendants Niv and Ahdout employed at FXCM to establish an internal trading system, EES, that would compete with external market makers, according to the plaintiffs' complaint. The deal Dittami signed with FXCM called for a 70-30 split of EES's trading proceeds (70% to FXCM). Defendants chose to spin out EES as Effex since FXCM's compliance staff determined that FXCM could not honestly claim to be running an agency model if EES was trading against FXCM's clients. FXCM and Effex, on the other hand, preserved the 70-30 split of trading profits—Effex replacing Dittami and FXCM preserving its 70% share—which they disguised as “compensation for order flow.” For years, FXCM gave essential assistance to Effex, and Effex depended on FXCM to remain afloat.
Effex became one of FXCM's largest liquidity suppliers, and Defendants offered unique trading benefits in order to push more of FXCM's trading activity to Effex.
The National Futures Association (NFA) and the Commodities Futures Trading Commission (CFTC) started looking into FXCM's association with Effex in 2013 and 2014. The NFA and CFTC announced regulatory settlements with the defendants on February 6, 2017, after the conclusion of trade, confirming the previously unknown link between FXCM and Effex and imposing heavy fines. The following day, the price of FXCM shares plummeted, causing the Plaintiffs and the Class to suffer.
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