Edmar Financial Company, LLC v. Currenex, Inc.

Background

This proposed class action concerns Currenex’s electronic foreign-exchange trading platform. The plaintiffs alleged that Currenex and several trading firms—Goldman Sachs, HC Technologies, LLC, State Street Bank and Trust Company, and unidentified defendants—secretly gave certain liquidity providers advantages over other platform users.

According to the amended complaint, Currenex and State Street publicly represented that the platform used disclosed order-priority rules, including “first in, first out,” and protected the confidentiality of users’ trading information. The plaintiffs alleged that Currenex instead used a secret rule that favored the trading defendants, sometimes even when their orders were submitted later or offered worse prices. They also alleged that Currenex gave HC Technologies administrator-level access that allowed it to view information about platform orders and possibly users’ trading activity.

The plaintiffs claimed that these practices caused them to pay too much when buying foreign exchange, receive too little when selling, incur higher execution costs, lose business opportunities, and expose proprietary trading information. Their claims included common-law fraud, conspiracy to defraud, aiding and abetting fraud, violations of Section 1 of the Sherman Act, violations of the Racketeer Influenced and Corrupt Organizations Act, breach of the implied covenant of good faith and fair dealing, tortious interference, New York General Business Law § 349, and unjust enrichment.

The Court’s Analysis

The defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6), which address subject-matter jurisdiction and whether a complaint states a legally sufficient claim. Some defendants also challenged venue and personal jurisdiction.

The court held that the plaintiffs adequately pleaded fraud against Currenex and State Street. The alleged public statements about order-priority rules and confidentiality were plausibly false if the alleged secret privileges and administrator-level access existed. The court also found plausible allegations of reasonable reliance, out-of-pocket losses, material omissions, and a duty to disclose based on defendants’ superior knowledge and partial statements.

The court allowed the conspiracy-to-defraud and aiding-and-abetting-fraud claims to proceed. It found that the complaint plausibly alleged that the trading defendants knew about the alleged fraud, negotiated secret privileges with Currenex, and substantially assisted the alleged scheme.

The court rejected the plaintiffs’ theory that the alleged conduct was a per se antitrust violation based on horizontal bid-rigging. It concluded that the alleged agreements were vertical agreements between the platform operator and individual trading firms, and that the complaint did not allege a horizontal agreement among the trading firms. The court nevertheless held that the plaintiffs plausibly pleaded a vertical restraint under the rule of reason, including a relevant market and antitrust injury. The defendants’ motion to dismiss the antitrust claims was therefore denied.

The court also held that the plaintiffs plausibly pleaded RICO enterprises, a pattern of mail or wire fraud, and RICO conspiracies. It further allowed the New York General Business Law § 349 claims against Currenex and State Street to proceed, concluding that the alleged deceptive practices plausibly affected platform users generally. The unjust-enrichment claims also survived because the alleged platform manipulation was not within the scope of the plaintiffs’ contracts and the plaintiffs plausibly alleged direct benefits to the defendants.

The court declined to dismiss the claims as untimely. Although the plaintiffs did not specify when they discovered the alleged misconduct, the complaint plausibly alleged that defendants concealed it, so the court concluded that the limitations issue could not be resolved at the pleading stage.

Disposition

The court stated that each motion to dismiss was “granted in part and denied in part.” The motion addressing subject-matter jurisdiction and failure to state a claim was granted to the extent that it dismissed Edmar and Irish Blue & Gold, Inc.’s claims for breach of the implied covenant of good faith and fair dealing, dismissed those plaintiffs’ claims for tortious interference with contract, and dismissed the claims for tortious interference with prospective economic advantage. That motion was denied in all other respects.

The motion by SS Global and Currenex was granted to the extent that the action was dismissed as to SS Global for lack of personal jurisdiction. The court found that the complaint improperly grouped SS Global with Currenex and did not adequately allege SS Global’s own involvement or a valid alter-ego, agency, or conspiracy basis for jurisdiction. That motion was denied in all other respects. The court also rejected Currenex’s argument that a forum-selection clause required XTX’s claims to be litigated in England because those claims did not arise under the services agreement.

Any motion for leave to amend had to be made within 30 days after entry of the order.