In Lehman Brothers Commercial Corporation v. Minmetals
International Non-Ferrous Metals Trading Company, Judge
John Keenan likened a foreign exchange transactions to a
contractual wager based on movements in specified
foreign-currency prices, noting that there was “no real
possibility of foreign currency changing hands.”
Lehman Brothers charged that Minmetals was responsible for multimillion-dollar margin calls, made by employee Hu Xiangdong on trades involving currency exchanges, interest-rate swaps, and Thai baht-denominated negotiable certificates of deposit (NCDs).
The defendants argued that Hu was not authorized to make
the trades and lodged a counterclaim accusing Lehman
Brothers of negligence, negligent misrepresentation and
breaching their fiduciary duty.
Lehman Brothers argued that the Martin Act barred the counterclaims, but the defendants countered that the transactions were not “securities” under the Act.
The judge sided with Minmetals, agreeing that the trades at issue could not be considered securities since the act defines securities as any “stocks, bonds, notes, evidences of interest or indebtedness or other securities.”