INTERACTIVE BROKERS, LLC, ET AL. VS. RICHARD W. BARRY, ETC. (C-000036-18, HUDSON COUNTY AND STATEWIDE) (A-4197-17T4)
In this action arising out of the aftermath of a Ponzi scheme operated through a hedge fund, a Receiver was appointed on behalf of the fund and authorized to pursue all causes of action belonging to the fund.
The hedge fund operated through the securities trading platform of plaintiffs Interactive Brokers, and its employee, Kevin Michael Fischer. The Receiver instituted suit against plaintiffs, alleging they aided and abetted the breach of fiduciary duty and common law fraud and initiated arbitration proceedings under the Financial Industry Regulatory Authority (FINRA) Code and the Customer Agreement executed between plaintiffs and the hedge fund's founder.
Plaintiffs moved for injunctive relief, arguing the claims asserted by the Receiver were beyond the scope of his authority because they were grounded on the damages suffered by the hedge funds' defrauded investors, rather than the hedge fund itself.
The court concluded the Receiver acted within the statutory authority granted him under N.J.S.A. 49:3-69(c) and (d) and N.J.S.A. 14A:14-1 to -27. The Statement of Claims submitted to FINRA listed the hedge fund as its sole claimant. A receiver's action is not invalidated, even if the return of the assets to the receivership may ultimately benefit its investors.
As the dispute fell within the Agreement, the parties were mandated to arbitrate the dispute in FINRA.
