Two former employees of MF Global have filed a class-action lawsuit against the firm's former Chief Executive Jon Corzine, other senior executives and board directors on behalf of themselves and current and former employees who acquired stock in the company while Corzine led the firm.
The lawsuit, filed in the United States District Court for the Southern District of New York, alleges that the defendants provided false information regarding the company's financial condition and made statements that artificially inflated the stock price.
Once the the firm was downgraded due to its exposure to risky trades in European sovereign debt, investors got spooked and the stock price dropped, causing employees' shares to lose value.
Related: Risk Chief Warned Corzine, Board of Dicey Trades
"Jon Corzine and the board breached their fiduciary duty to their employees and destroyed their careers and retirement savings," Jacob Zamansky, lead counsel for the plaintiffs, said in an email.
The plaintiffs are Monica Rodriguez, the New York-based head of credit for the Americas, and Cyrille Guillaume, the London-based managing director of the commodities and stock division.
Plaintiffs are seeking class action status for all employees who acquired MF Global shares between May 20, 2010 and Nov. 3, 2011 through company-supported plans. At the time of the company's bankruptcy Oct. 31, the firm had close to 2,900 employees.
Employee plans included a long term incentive plan, which required employees to receive a portion of their compensation in stock, and an employee stock purchase plan (ESPP), which allowed them to buy shares at a discount. The lawsuit claims the defendants breached their duty "to keep [employees] reasonably informed of all facts and circumstances relating to their decision to participate in the ESPP."
If employees had known MF Global's true financial state, Zamansky said, "they could have refused to buy in or insisted on compensation arrangements that were all cash."
The employees did not file suit against MF Global, the company itself, because it is currently undergoing bankruptcy proceedings.
Write to Julie Steinberg at Julie.Steinberg@dowjones.com