Barclays defeats $17.7B fraud lawsuits over structured notes

Barclays wins dismissal of $17.7B securities fraud lawsuits in U.S. court

Barclays has secured the dismissal of two major U.S. securities fraud lawsuits tied to the unauthorised sale of $17.7 billion in structured notes and exchange-traded products. The cases, brought by investors in New York, centred on claims that the bank exceeded regulatory limits and misled buyers. A federal judge ruled there was no proof of fraudulent intent by the bank or its former chief executive, Jes Staley. The legal disputes stemmed from Barclays admitting it had sold $15.2 billion more in structured notes and exchange-traded notes (ETNs) than U.S. regulators permitted over a five-year period. This figure was later revised to $17.7 billion. In September 2022, the bank settled a related case with the U.S. Securities and Exchange Commission for $361 million.

The lawsuits—May et al v Barclays Plc and Puchtler v Barclays Plc—were heard in the U.S. District Court, Southern District of New York. Investors argued they suffered losses when Barclays halted sales of its iPath Series B S&P 500 VIX Short-Term Futures ETN (VXXB) in March 2022, triggering a market squeeze. The product was later delisted and redeemed, with no further trading activity.

Judge Lewis Liman dismissed the claims, finding no evidence that Barclays or its executives, including former CEO Jes Staley—who left in November 2021—acted with intent to defraud. The court noted that Barclays' corrective actions, such as stopping sales and offering buybacks, undermined allegations of wrongdoing.

In a separate but related matter, Barclays agreed to pay $19.5 million in December to resolve a shareholder lawsuit connected to the same overissuance issue. With the lawsuits now dismissed, Barclays avoids further financial penalties beyond its prior settlements. The bank's remedial steps, including the sales halt and buyback programme, were key factors in the court's decision. Meanwhile, the delisted VXXB remains tied to its final redemption value, while similar volatility-linked products continue trading.