FINRA Panel Says Societe Generale Must Pay $61M

A California FINRA arbitration panel has decided against Societe Generale SA and ordered the firm to pay $61 million to fund manager Aurum STS Aggressive Trading LLC in a dispute that has been going on for over two years.

The Statement of Claim was filed in the case back in June 2009, asserting various causes of action including breach of contract by SGWL and Societe Generale, breach of contract by SG Americas and Cowen, breach of fiduciary duty, unjust enrichment, negligence and failure to honor guarantee, among other things. All of the causes of action related to November Warrants issued by SWGL to the Claimant that were based on the net asset value of the Aurum Leveraged Fund S1 and linked to the leveraged performance of a basket of hedge funds. According to the arbitration award, the warrants expired in November 2008 during the peak of market turmoil. Claimant Aurum was entitled to receive payment but it was told that the bank would pay based on new terms decided by Societe Generale.

Subsequent to the filing of the claim, Societe Generale filed a counterclaim alleging that Aurum breached its agreement with the bank and Aurum’s manager, Atef Eltoukhy, had caused the fund to fail to hold up its end of the deal. The FINRA arbitration panel decided to dismiss the counterclaims filed by Societe Generale.

After the conclusion of the fifteen days of evidentiary hearings, the panel went into executive session to consider all of the oral and documentary evidence presented by the parties, prior to rendering their decision. Thereafter, the panel decided that the Respondents were jointly and severally liable to Aurum and ordered them to pay compensatory damages in the amount of $125,948,119, less payments of $91,938, 597 previously paid by Respondents, resulting in net general and compensatory damages in the amount of $34,009,521. They further concluded that Respondents were jointly and severally liable for interest on the $125,948,119 at 9% per annum from December 1, 2008 through October 6, 2011, in the amount of $26,990,647. The bottom line is that Societe Generale was on the hook for $61 million.

In its final decision in the case, the FINRA panel assessed the entire $40,650 in forum fees for the arbitration against Respondents, jointly and severally. (FINRA# 09-03598; Aurum STS Aggressive Trading LLC v. Societe Generale, Societe Generale Warrants Limited NV, SG Americas Securities LLC and Cowen Group Incorporated).

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