Barclays successfully defeated two U.S. securities fraud lawsuits on Friday related to its unauthorized sale of $17.7 billion in securities—far exceeding the limit set by U.S. regulators.
U.S. District Judge Lewis Liman in Manhattan ruled that investors who purchased Barclays’ iPath Series B S&P 500 VIX Short-Term Future exchange-traded notes (“VXX”) could not sue based on the bank’s general assurances regarding its internal controls. This decision comes despite Barclays issuing the notes without the required regulatory approval.
Liman also dismissed similar claims from investors affected by a market squeeze when Barclays suspended VXX sales in March 2022. The suspension caused the price of VXX securities—sold short by investors—to surge 140% above their indicative value.
The judge found no evidence of intentional fraud or reckless misconduct, noting that former Chief Executive Jes Staley and other Barclays officials had incentives to properly register the securities rather than allow the issue to escalate. He emphasized that Barclays’ corrective actions—including halting sales, informing regulators and the public, and offering a buyback—demonstrated a responsible approach rather than an intent to deceive.
Lawyers for the investors in both class-action lawsuits have not yet responded to requests for comment. Liman’s rulings spanned 111 pages.
Barclays initially admitted in March 2022 that it had sold $15.2 billion more structured notes and exchange-traded notes (ETNs) than permitted over the previous five years. The bank later revised the overissuance estimate to $17.7 billion, calling the error “entirely avoidable” and “self-inflicted.”
In September 2022, Barclays reached a $361 million settlement with the U.S. Securities and Exchange Commission (SEC), including a $200 million civil penalty, over the overissuance. The bank also agreed in December to pay $19.5 million to settle a related shareholder lawsuit in Manhattan.
Jes Staley resigned as Barclays’ chief executive in November 2021.
The cases, filed in the U.S. District Court for the 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.
