TRENTON, N.J. (Legal Newsline) – The receiver for Osiris Fund LP’s decision to file for arbitration to resolve claims filed against Osiris securities trading platform Interactive Brokers LLC and Interactive Brokers employee Kevin Michael Fisher was upheld on appeal by the Superior Court of New Jersey, Appellate Division in a Dec. 31 opinion.
"In this matter, arising out of securities law violations, we conclude that a receiver acting on behalf of a defrauded entity may initiate arbitration even if the defrauded investors of the entity will ultimately benefit from any assets recouped in arbitration,” Judge Heidi Currier wrote.
The appeals court said in its ruling that the New Jersey attorney general filed a legal action against hedge fund Osiris and its founder, Peter Zuck, alleging that Osiris orchestrated “a Ponzi scheme, which defrauded its investors of more than $6.5 million.”
After Zuck was found guilty of securities law violations and of defrauding Osiris’ investors and ordered to pay $7.56 million, Richard Barry was appointed as Osiris’ receiver.
Barry, who the appellate court said was “the sole claimant acting on behalf of Osiris,” filed claims against Interactive Brokers and Fisher. Barry began Financial Industry Regulatory Authority (FINRA) arbitration proceedings.
The court said the receiver (Barry) filed for arbitration because he believed that the “plaintiffs were required to resolve any dispute in arbitration under the FINRA Code and pursuant to the customer agreement drafted by Interactive and executed by Interactive and Zuck on behalf of Osiris.”
The opinion said Barry’s statement of claims against Interactive Brokers and Fisher “listed seven causes of action including: negligence and/or failure to supervise; breach of implied/express contract, implied duty of good faith and fair dealing and industry rules; aiding and abetting breach of fiduciary duty; aiding and abetting common law fraud; unsuitability; fraudulent conveyance; and unjust enrichment.”
Interactive Brokers asked the Superior Court of New Jersey, Chancery Division, Hudson County, to rule that the receiver did not have the power to submit the claims to arbitration and to grant an injunction against the arbitration proceedings.
The Chancery Court entered an order on May 16, 2018, that denied the requested injunction and granted a motion by Barry to order arbitration of the claims.