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FXCM Securities Fraud Class Action Lawsuit

FXCM Shareholder Class Action

On January 15, 2015, the Swiss National Bank announced that it was ending a policy to support the euro against the Swiss frank, causing the Swiss franc to increase almost 41% verses the euro.  That same day FXCM announced a $225 million loss due to this volatility and FXCM shareholders lost almost 90% of their value in three trading days.  This securities fraud complaint asks the question whether executives at FXCM fairly disclosed the potential risks to its business due to sudden market volatility.

What investors are part of this class action? The class period is currently defined as all persons who purchased FXCM common stock between June 11, 2013 and January 20, 2015, inclusive (the “Class Period”).  FXCM common stock trades under the symbol “FXCM”.

Procedural Status.  The lawsuit was filed on May 8, 2015 and is captioned International Union of Operating Engineers Local No. 478 Pension Fund v. FXCM, Inc. et al.. It was filed in the New York Southern District Court. Its civil docket number is 1:15cv03599.  The lead plaintiff deadline is July 7, 2015.                                                                     

FXCM provides online foreign exchange ("FX") trading and related services to retail and institutional customers worldwide. FXCM  acts as an agent between retail customers and a collection of global banks and financial institutions by making foreign currency markets for customers trading in foreign exchange spot markets. FXCM provides its customers access to over-the-counter FX markets through its proprietary technology platform.

The complaint alleges that FXCM issued materially false and/or misleading statements regarding its business operations and the strength of its financial prospects, while concealing significant weaknesses concerning its core business including:

  • FXCM touted that its agency model of FX trading was extremely low-risk, when in fact FXCM’'s agency model did not insulate it from financial risk from its heavily leveraged clients;
  • FXCM proclaimed that volatility in FX markets was uniformly good for its business model, when in fact FXCM did not disclose the true potential risk posed by market volatility; and
  • FXCM claimed it had adequate capital reserves, when in fact it did not maintain sufficient regulatory capital reserves.

On January 16, 2015, FXCM announced that it had been extended a $300 million loan by Leucadia National Corp. in order to stave off the regulatory default and possible bankruptcy facing the company. The terms of the loan were described as "highly punitive" and wiped out nearly all shareholder value in the company. Trading of the FXCM's stock was suspended. 

Trading of FXCM stock resumed on January 20, 2015. That day, the stock price closed at $1.60, down from a close of $12.63 on January 15, 2015. In all, FXCM stock dropped over 90% in three trading days.

Current Case Status: 
This case is in the notice period. When a shareholder brings suit under certain federal securities law, generally that shareholder must give notice via a press release. This notice starts a 60 day period of time when any shareholder can investigate the underlying claims of the lawsuit and then elect to bring suit as well. At the end of this 60 day period, the court appoints one shareholder (or a group of shareholders) to prosecute the securities litigation. We will review the docket again in June and update this page as warranted.
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