The United States District Judge for the Southern District of New York Victor Marrero granted final approval of the settlement inRubin v. MF Global, Ltd., 1:08-cv-02233. The settlement reached between the Lead Plaintiffs and MF Global, Ltd. and other defendants totals $90 million in cash.
The lawsuit, initially filed in 2008, was brought on behalf of purchasers of common stock of MF Global pursuant or traceable to the Registration Statement and Prospectus issued in connection with the Company’s initial public offering on or about July 19, 2007 (the “IPO”).
“We are pleased that the Court approved the settlement, and believe it is an excellent result for MF Global investors who purchased common stock through the IPO,” said Plaintiffs’ Co-Lead Counsel Carol Gilden, a partner at Cohen Milstein Sellers & Toll PLLC.
The complaint asserts that defendants assured investors that the Company had in place a rigorous, robust system of risk controls capable of monitoring risk on a continuous, “real time” basis, when in fact, among other things, MF Global had deactivated trading and margin controls on brokers’ computers to speed transaction times. When a rogue trader subsequently lost $141.5 million speculating in wheat futures in overnight trading, MF Global was forced to absorb those losses as the clearing broker. When the news hit the markets, MF Global’s stock plummeted, losing $1.1 billion in market capitalization over a two-day period.
Judge Marrero had dismissed the case in August 2009, however in September 2010 the Second Circuit revived the suit and entered a precedent making ruling when it sided with plaintiffs on their claim that MF Global misrepresented its risk controls while marketing its IPO. In that decision, the Second Circuit held that companies cannot make false or misleading statements in their offering documents, and then hide behind risk disclosures related to those facts in their attempt to escape liability under the federal securities laws.
“The MF Global case affirms that financial institutions will be held accountable through the judicial system when they mislead investors in IPO’s, as well as the important role that institutional investors serve,” said Ms. Gilden.
On October 31, 2011, MF Global Holdings, Ltd. filed a voluntary Chapter 11 petition for relief under the United States Bankruptcy Code. As a result of the bankruptcy filing, all pending litigation against MF Global was automatically stayed, including all proceedings in this case. Cohen Milstein, however, worked with counsel for the defendants and with MF Global's bankruptcy counsel to have the automatic stay lifted, persuading the other defendants to replace the amount previously paid into the settlement fund by MF Global, as that amount was clawed back by the bankruptcy filing. Final approval of the $90 million settlement came a day after the bankruptcy judge overseeing MF Global's Chapter 11 bankruptcy granted MF Global’s motion to lift the stay, allowing the District Court to go forward with the final settlement hearing.
Lead Plaintiffs include the Central States, Southeast and Southwest Areas Pension Fund and others. Cohen Milstein Sellers & Toll PLLC serves as Plaintiffs’ Co-Lead Counsel.
For more information about the case, please contact:
Carol V. Gilden
Cohen Milstein Sellers & Toll PLLC
Chicago Office: 312.629.3737
The Final Approval Order can be found here.