Overview
In an opinion Friday, Judge Scheindlin largely denied Barclays’ motion to dismiss a securities fraud class action alleging that Barclays misled investors about its anonymous trading platform, or “dark pool,” referred to as “LX.” At the outset, Judge Scheindlin found it appropriate for the plaintiffs to have borrowed substantially from the New York Attorney General’s complaint against Barclays in a similar state court case because the “facts are derived from a credible complaint based on facts obtained after an investigation.” (By way of contrast, we covered a case in 2013 in which Judge Cote took issue with borrowing from another private complaint that was based on confidential sources.) On the sufficiency of the allegations, Judge Scheindlin dismissed claims arising from various public statements about the company's overall business practices and risk controls that she concluded were “not only generic, but are for the most part aspirational.” But she allowed claims to go forward that were specific to LX. According to the plaintiffs, Barclays boasted about LX being a platform free from “predatory” traders while secretly encouraging predators. And she found those statements to be material, notwithstanding that LX represented a small portion of Barclays’ revenue, because she concluded “the specific misstatements about LX — which include touting its safety while secretly encouraging predatory behavior — call into question the integrity of the company as a whole”
