Securities Regulation Daily Wrap Up, SECURITIES OFFERINGS—C.D. Cal.: Claims may proceed against Barclays, former CEO in fraud action over Epstein ties, (Jun 26, 2025)

By Kristin J. Angelino, J.D.

Although some claims may proceed, the court dismissed securities fraud claims against Barclay’s board chairman to the extent that they are based on the chairman’s refusal to comment on its former CEO’s departure.

Stockholders sued Barclays Bank PLC, its former CEO James Staley and its group chairman Nigel Higgins for violations of Sections 10(b) and 20(a) of the Exchange Act related to alleged material misrepresentations regarding the relationship between Staley and convicted sex offender Jeffrey Epstein. One of the lead plaintiffs also sued defendant Barclays Bank for violations of Section 90A of the UK’s Financial Services and Markets Act (FSMA) related to the alleged omission of matters required to be included in published information. The district court denied defendant Staley’s motion to dismiss all of the counts in plaintiffs’ first amended complaint (the FAC) against him, denied defendant Barclays Bank’s motion to dismiss the Section 10(b) claims against it, and granted the motion to dismiss the Section 10(b) and 20(a) claims against Higgins, but only to the extent that they are based on Higgins’ declination to comment on Staley’s departure. The court also granted defendant Barclays Bank’s motion to dismiss the claims against it under Section 90A of FSMA, with leave to amend. (Merritt v. Barclays Bank PLC, No. 2:23-cv-09217 (C.D. Cal. June 24, 2025)).

Defendant Barclays Bank PLC is a multinational bank headquartered in London. This case was brought on behalf of purchasers of Barclays Bank’s (1) American Depository Receipts (ADRs) traded on the NYSE and (2) ordinary shares traded on the LSE from July 22, 2019 through October 12, 2023 (the Class Period). It arises out of alleged material misrepresentations made by defendants during the Class Period concerning the nature and extent of the relationship between Staley and Jeffrey Epstein.

Misleading statements. Defendants argued that the Section 10(b) claims against it should be dismissed, since plaintiffs failed to plead material misstatements and there is no loss causation. Defendants Barclays and Higgins also argued that plaintiffs failed to sufficiently allege scienter. The court disagreed, finding that plaintiffs adequately alleged all elements of its Section 10(b) claim.

First, the court found that various statements in the FAC were plausibly misleading. The court first looked at a statement made to the New York Times in July 2019 by a Barclays Bank spokesperson, in which the spokesperson said that Mr. Staley never engaged or paid fees to Mr. Epstein. The court held that plaintiffs plausibly alleged that this statement was misleading when plaintiffs alleged that the Staley-Epstein relationship was close enough that the payment of fees was not necessary. Next, the court held that plaintiffs sufficiently alleged that various statements in the company’s press releases in 2019 and 2020 and its 2019 Annual Report were potentially misleading. For example, in a February 2020 press release and the 2019 Annual Report, defendants stated that “Mr. Staley developed a professional relationship with Mr. Epstein.” The court held that this statement supports an inference that Staley and Epstein only had a professional relationship, which would be potentially misleading, especially given the context of the statement, in which the board reiterated that Staley had the board’s “full confidence” and recommended his reelection at the same time. Finally, the court found that statements made by Staley in February 2020 on an earnings conference call with analysts were also misleading. Staley stated on that call that his relationship with Epstein tapered off after he left JPMorgan, stopped before Staley joined Barclays and that the two men had had no contact since then. The court held that plaintiffs’ allegations support that Epstein and Staley had contact, even if indirectly, past this point in time.

The court also disagreed with Higgins’ argument that he cannot be liable for misleading statements he did not personally make. The court held that Higgins had ultimate control for the statements made by Barclays since he was the chairman of the board, therefore it “logically follows” that statements made by the board were made or at least approved by Higgins.

Materiality. Defendants argued that any misrepresentations or omissions about Staley’s personal conduct were not material and also that there was sufficient information in the public domain for investors to determine the true nature of the Staley-Epstein relationship. The court disagreed, noting first that defendants failed to cite any binding authority that misrepresentations about matters personal to a CEO are not material. Also, the court found that defendants failed to show that a reasonable investor “could not find the relationship of a top executive of Barclays Bank with a convicted sex offender related to their decisions.” Finally, the court stated that, even if there had been representations in the media that Staley and Epstein had more than a professional relationship, defendants appeared to deny the representations, which, according to the court, investors would reasonably give more weight.

Scienter. The court held that plaintiffs pleaded scienter with sufficient particularity as to defendants Barclays Bank and Higgins. Specifically, the court reasoned that the intent to deceive or deliberate recklessness was supported by plaintiffs’ allegations that Barclays Bank and Higgins received evidence revealing the true nature of Staley’s relationship with Epstein as early as December 2019, and yet they continued to make statements that fully supported Staley, even after he left Barclays on November 1, 2021.

Loss causation. The court held that plaintiffs sufficiently alleged loss causation when they alleged that the decision notice issued by the UK’s Financial Conduct Authority (the FCA) on the results of its investigation into the relationship between Staley and Epstein, which was published on October 12, 2023 (the FCA Decision Notice), revealed the truth about Staley’s relationship with Epstein and Barclays Bank’s knowledge thereof. Barclays also released a press release that same day that disclosed the conclusion by the Board’s remuneration committee that Staley was now ineligible for or would forfeit some monetary awards. The court held that the detailed 79-page FCA Decision Notice and the 2023 press release could plausibly have caused the stockholders’ alleged loss.

Control person claims. Because plaintiffs sufficiently pleaded a primary violation under Section 10(b), the court denied defendants’ motion to dismiss plaintiffs’ secondary control person claims under Section 20(a).

Section 90A violations. Defendant Barclays Bank initially argued that the court should decline to exercise supplemental jurisdiction over this claim and dismiss it. The court disagreed, holding that it has original jurisdiction over this claim under the diversity statute. The court also disagreed with defendant’s alternative argument that the court should decline jurisdiction under the doctrine of forum non conveniens. The court determined that all of the private interest factors weigh in favor of retaining jurisdiction. Further, it held that, even if, as defendant Barclays argued, “UK courts have a greater interest in adjudicating” the claim, this does not outweigh the court’s determination of the private factors.

Even though the court found that it should retain jurisdiction over this claim, it held that it should be dismissed since it is insufficiently alleged. Plaintiff argued that when Barclays Bank disclosed the FCA investigation in February 2020, Barclays knew that its response to the FCA was inaccurate, yet it delayed in disclosing their understanding of the true nature of Staley’s relationship with Epstein until the October 2023 press release based on the FCA decision. The court reasoned that, since the October 2023 press release is specifically based on the FCA decision and therefore could not have been disclosed earlier, it cannot support a theory of dishonest delay.

The case is No. 2:23-cv-09217.

Judge: Frimpong, M.

Attorneys: Laurence M. Rosen (The Rosen Law Firm, P.A.) for Stephen Merritt.* Peter Bradley Morrison (Skadden, Arps, Slate, Meagher & Flom LLP) for Barclays Bank PLC.

Companies: Barclays Bank PLC

LitigationEnforcement: FraudManipulation CaliforniaNews