March 21 – Barclays won the dismissal on Friday of two U.S. securities fraud lawsuits stemming from the British bank’s unauthorized sale of $17.7 billion more securities than U.S. regulators allowed.
U.S. District Judge Lewis Liman in Manhattan said investors who acquired Barclays’ iPath Series B S&P 500 VIX Short-Term Future exchange-traded notes could not sue over general assurances the bank made about its internal controls even as it issued the notes without the required regulatory approval.
Liman also dismissed similar claims by investors who got caught in a market squeeze when Barclays suspended VXX sales in March 2022, causing the price of VXX securities they had sold short to soar 140% above their so-called indicative value.
The judge also found no proof of intent to defraud or conscious recklessness, saying bank officials including former Chief Executive Jes Staley would have been incentivized to register more securities rather than let the problem grow.
Barclays’ remedial efforts including the sales halt, disclosures to regulators and the public, and a buyback offer were “a prudent course of action that weakens rather than strengthens an inference of [intent to defraud],” Liman wrote.
Lawyers for investors in both proposed class actions did not immediately respond to requests for comment. Liman’s decisions totaled 111 pages.
Barclays halted VXX sales in March 2022, when it admitted to having sold $15.2 billion more structured notes and ETNs over the prior five years than U.S. regulators allowed.
The bank later boosted the overissuance estimate to $17.7 billion. Barclays executives have called the overissuance “entirely avoidable” and “self-inflicted.”
In September 2022, Barclays reached a $361 million settlement, including a $200 million civil fine, with the U.S. Securities and Exchange Commission related to the overissuance.
Barclays agreed in December to pay $19.5 million to settle a related shareholder lawsuit in the Manhattan court.
Staley stepped down as the bank’s chief executive in November 2021.
The cases 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.
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