Judge Backs Plaintiffs in Currenex Case, With a “But”
Posted by Colin Lambert. Last updated: May 22, 2023
A judicial opinion published by the Southern District Court of New York, which is hearing the class action brought against Currenex, Goldman Sachs, HC Tech, State Street and others for alleged malpractice on the Currenex platform, has dismissed a Motion to Dismiss, by finding largely that the Plaintiffs’ arguments the platform failed to disclose its move away from the FIFO (first-in-first-out) rule, provided special access to trades for other defendants and granted special access to the order book, are “plausible”, meaning the case can proceed.
There is a caveat in the Opinion, however, for the court finds that it has no jurisdiction over one of the defendants – State Street Global Markets – which is a company set up under English law. This likely means that any US-based case will continue without State Street Global Markets in the dock. The Opinion also finds the Plaintiffs failed to successfully argue a wider, horizontal, conspiracy, and that claims for Tortious Interference also come up short.
Those technicalities aside, however, the Opinion makes bleak reading for Currenex and its fellow defendants, for the judge’s discussion lists a series of rebuffs to their arguments and largely finds for the Plaintiffs. Specifically they find that defendants’ arguments against fraud claims are “meritless” and that the claims the platform made misrepresentations over the trade matching process that they knew were false, also that their public disclosures were false, have been “pleaded adequately”.
The claims argue that Currenex granted special access to certain LPs, namely Goldman Sachs, HC Tech and State Street, which enabled them to “jump the queue” to execute orders rather than be top-of-book to start with. This meant they could cherry pick trade requests from clients by moving up from whatever level they sat, to top-of-book to win the trade and went against Currenex’ public disclosures, which the Plaintiffs argue, stated that tie breakers on the platform were FIFO with priority given to non-last look orders.
The claims also allege that HC Tech was granted “administrative access” to the platform, on which the updated lawsuit from 2022 (the original was filed in 2021) states, “it is difficult to overstate the harm caused” by this access, adding, “for instance, HC Tech could see its rivals’ potential and actual trading patterns – which in many cases were the result of proprietary algorithmic trading systems. HC Tech could even see the ‘hidden’ orders, allowing it to trade out ahead and make guaranteed profits, at the expense of other users.”
In the opinion, the judge observes the Plaintiffs have, “adequately alleged facts that defendants’ statements regarding the confidentiality of user transactions were false”.
He also observes that the Plaintiffs adequately challenged Currenex over its disclosures and that the platform deliberately omitted facts that it, and the individuals named in the lawsuit, knew were contrary to its public disclosures.
The claims that the defendants were economically hurt were also found to be “plausible”, as were the claims for conspiracy the defraud, the defendants move to dismiss which “are without merit” and “fail at the gate”. The Opinion also finds Plaintiffs’ claims of racketeering and “relevant market” were justifiable and that their argument over a breach of the US Sherman Act were “plausible”. Statute of limitations arguments by the defendants – effectively saying the Plaintiffs should have known of the alleged activity earlier, were also rebutted by the judge.
Where the Opinion reads better for the defendants is in “horizontal” anti-trust claims, which effectively alleged that the defendants acted together. The Opinion finds that whereas a “vertical” conspiracy has plausibly been claimed, the structure of the alleged secret agreements were “plainly vertical” and involved certain privileges being granted individually to each firm. It also finds that claims of Tortious Interference, brought by Edmar and IBG, the original claimants, were without merit because they failed to allege an actual breach of contract on the part of Currenex.
The final piece of good news for the defendants is for one of them only – as noted, State Street Global Markets is an English-registered business servicing clients in the European Economic Area, therefore, the Opinion states the US court lacks jurisdiction to hear that element of the case. This is targeting another Plaintiff, XTX Markets, which is arguing that the impact on its business was global, and therefore should include State Street Global Markets, even though it signed an agreement that would operate under English law.
The parties to the case have 30 days (from 18 May) to submit a motion for leave to amend, it is likely only that the defendants would attempt such a move as the Opinion very much is in balance of the Plaintiffs.