Case Update: Pomerantz, as sole Lead Counsel, achieved a $27 million settlement on behalf of the Class in Strougo v. Barclays PLC, which is pending court approval. Pomerantz Managing Partner Jeremy Lieberman stated, “We are extremely pleased with this settlement, which represents more than 28 percent of plaintiffs’ alleged recoverable damages,” he said, “well above the norm in securities class actions.”
The litigation against Barclays PLC (“Barclays” or the “Company”) and certain of its officers concerned defendants’ alleged concealment of information and misleading statements regarding its management of its “LX” dark pool, a private trading platform where the size and price of the orders are not revealed to other participants. The Class consists of investors who purchased Barclays’ American Depository Shares (“ADS”) and lost hundreds of millions of dollars when the truth about Barclays’ management of its dark pools came to light.
The complaint alleged that throughout the Class Period, defendants made false and/or misleading statements, and failed to disclose material adverse facts regarding the Company's operation of its dark pool. Specifically, defendants failed to disclose that: (i) Barclays engaged in a "systematic pattern of fraud and deceit" by using its dark pool to favor high-frequency traders over its other clients; (ii) the pools were promoted as offering investors protection from predatory traders, while Barclays instead courted HFT firms by charging them lower rates; (iii) Barclays falsely understated the percentage of aggressive HFT activity in its dark pool; (iv) Barclays failed to provide monitoring services it promised to investors which would protect the dark pool from aggressive, predatory HFTs; (v) Barclays routed a disproportionately high percentage of client orders to its own dark pool while falsely representing that it routed client orders in a manner that did not favor Barclays LX; (vi) Barclays secretly gave HFT firms informational and other advantages over other clients trading in the dark pool; (vii) Barclays' practices subjected it to regulatory scrutiny and significant reputational harm; (viii) and as a result of the above, the Company's financial statements were materially false and misleading at all relevant times.
Class certification was granted on February 2, 2016 by U.S. District Judge Shira Sheindlin. In certifying the Class, Judge Scheindlin held that even though the dark pool was just a tiny part of Barclays’ overall operations, defendants’ fraud was qualitatively material to investors because it reflected directly on the integrity of management. Defendants appealed Judge Scheindlin’s ruling in the Second Circuit Court of Appeals.
Pomerantz, in successfully opposing the appeal, achieved a precedent-setting decision in November 2017, when the Second Circuit affirmed Judge Scheindlin’s class certification ruling. The Court held that direct evidence of market efficiency is not always necessary to invoke the Basic presumption of reliance and was not required here.
The Second Circuit also put an end to effort by defendants to minimize their burden of rebuttal, making it abundantly clear that defendants seeking to rebut the presumption that investors rely on prices set on an efficient market must do so by a preponderance of the evidence.
This ruling will form the bedrock of class action securities litigation for decades to come.
The action, filed in United States District Court, Southern District of New York, and docketed under 14-cv-5797, was on behalf of a class consisting of all persons or entities who purchased Barclays securities between August 2, 2011 and June 25, 2014, inclusive, and sought to recover damages against defendants for alleged violations of the federal securities laws under the Securities Exchange Act of 1934 (the "Exchange Act").
Pomerantz’s Barclays litigation team was led by Jeremy A. Lieberman and Tamar A. Weinrib. Marc I. Gross and Emma Gilmore assisted them on the appeal.