<p>The legal
representatives of <a href=”https://www.financemagnates.com/tag/global-brokerage/” target=”_blank” rel=”follow”>Global Brokerage, Inc.</a>, formerly known as FXCM Inc. (FXCM), Drew Niv, and William Ahdout, have filed a proposed settlement with the lead plaintiffs
of the class-action lawsuit, E-Global Trade and Finance Group, Inc. (E-Global),
L.P., and Shipco Transport Inc. (Shipco).</p><p>According to the court documents from
3 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.</p><p>FXCM Settles with
Investors after Six Years</p><p>The case
against FXCM is reaching its conclusion after more than six years. It began in
February 2017 when Tony Khoury filed the first of four related shareholder
actions against FCXM, alleging violations of the Securities Exchange Act of
1934. </p><p>The newest
court filing states that “all of the terms of the settlement and
resolution of this matter by the Parties, and is intended by the Parties to
fully and finally compromise, settle, release, resolve, remise, discharge, and
dismiss with prejudice the Released Claims (as defined herein) against the
Released Parties.”</p><p>As part of
the pending case, the plaintiffs wanted all persons and entities who
purchased publicly listed Class A common stock of Global Brokerage, Inc.
between 15 March 2012 and 6 February 2017 to be able to seek redress.</p><p>In December
2022, a private mediation took place, which resulted in a decision to resolve
this action completely. On 23 December 2022, both parties executed a binding
term sheet that set forth the material terms and obligations with respect to the
settlement. </p><p>As part of
the agreement, the defendants have denied and continue to deny any allegations
of fault, wrongdoing or damages arising from any of the conduct. They have
denied that the plaintiffs or participants in the lawsuit have suffered damages
as a result of any of the conduct alleged in the case. </p><p>”The
Individual Defendants continue to believe the claims asserted against them in
the Action are without merit and have agreed to enter into the Settlement set
forth in this Stipulation solely to avoid the expense, distraction, time and
uncertainty associated with the Action,” the settlement document added.</p><p>Watch the recent FMLS22 panel on retail traders and post covid challenges.</p><p>Allegations against FXCM</p><p>The
plaintiffs alleged that the brokerage firm had committed securities fraud. It
allegedly provided incomplete information and omitted material facts about its
relationship with Effex Capital.</p><p>The global brokerage
falsely represented its purported agency-trading model and its relationship
with 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 retail
trader to the liquidity provider that offers the best price at the time. </p><p>FXCM’s
profit was supposed to be only a margin to the execution price, but as it
turned out, the broker received up to 70% return on the revenue generated by
Effex, which was one of the firm’s primary liquidity providers at the time,
additionally investing against FXCM’s clients.</p><p>In the company’s
financial statements, this illegal procedure was disguised as ‘payments for order
flow’, with the former Global brokerage providing unfair competitive advantages
to Effex in order to channel as much of its clients’ trading volumes to the
firm as possible. </p><p>It is worth
recalling that FXCM’s activities were previously part of the investigations of
the U.S. Commodities Futures Trading Commission (CFTC) and the National Futures
Association (NFA). In February 2017, the NFA and the CFTC announced settlements
with the broker, revealing for the first time the relationship that FXCM had
with Effex. <a href=”https://www.financemagnates.com/forex/brokers/breaking-cftc-levies-7m-fine-fxcm-forced-quit-us-market/” target=”_blank” rel=”follow”>FXCM had to pay $7 million in a settlement with the CFTC </a>and forgo
domestic regulation, leaving the U.S. market.</p><p><a href=”https://www.financemagnates.com/forex/brokers/exclusive-nfa-charged-fxcm-using-lp-no-dealing-desk-execution/” target=”_blank” rel=”follow”>In a separate
settlement</a>, the NFA revealed that between 2010 and 2014, FXCM received $77 million
in rebates from Effext. </p><p>From FXCM to Global
Brokerage</p><p>In the
aftermath of its regulatory clampdown, <a href=”https://www.financemagnates.com/forex/brokers/fxcm-inc-renamed-global-brokerage-inc-following-us-upheaval/” target=”_blank” rel=”follow”>FXCM changed its name to Global
Brokerage in late February 2017</a>. However, the brokerage services part of its
business remained with the FXCM name.</p><p>The report
published by Global Brokerage for the three months ended 30 September 2022
showed total net revenues of $32.3 million, while for the first nine months of
2022, they came in at $101.2 million. It was a slightly lower outcome than the <a href=”https://www.financemagnates.com/binary-options/brokers/global-brokerages-net-income-surges-by-22-to-378-million-in-q2-2022/” target=”_blank” rel=”follow”>$37.8 million reported in Q2 2022.</a></p>
This article was written by Damian Chmiel at www.financemagnates.com.
