Barclays won two U.S. securities fraud lawsuits involving the British bank’s illegal selling of $17.7 billion more securities than U.S. regulators permitted, which were dismissed on Friday.
In Manhattan, U.S. District Judge Lewis Liman ruled that investors who purchased Barclays’ iPath Series B S&P 500 VIX Short-Term Future exchange-traded notes (“VXX”) could not file a lawsuit against the bank for providing general assurances regarding its internal controls while issuing the notes without the necessary regulatory approval.
When Barclays halted VXX sales in March 2022, investors who were trapped in a market squeeze saw their shorted VXX shares’ price rocket 140% beyond its so-called indicative value.
Liman similarly rejected similar accusations made by investors.
Additionally, the judge found no evidence of deliberate negligence or intent to defraud, stating that bank managers, including former CEO Jes Staley, would have been motivated to register more securities rather than allow the issue to worsen.
“A prudent course of action that weakens rather than strengthens an inference of [intent to defraud]” is how Liman described Barclays’ corrective actions, which included the sales halt, disclosures to the public and regulators, and a buyback offer.
When Barclays acknowledged selling $15.2 billion more structured notes and ETNs over the previous five years than U.S. regulators permitted, the bank stopped selling VXX in March 2022.
Later, the bank raised the estimate of overissuance to $17.7 billion. The overissuance has been described as “self-inflicted” and “entirely avoidable” by Barclays management.
Laptops 1000The U.S. Securities and Exchange Commission and Barclays agreed to a $361 million settlement in September 2022, which included a $200 million civil punishment.
In December, Barclays consented to settle a related shareholder action in the Manhattan court for $19.5 million.
In November 2021, Staley left his position as CEO of the bank.
The lawsuits in the U.S. District Court, Southern District of New York, are May et al. v. Barclays Plc, No. 23-02583, and Puchtler v. Barclays Plc et al., No. 24-01872.
