THE BOTTOM LINE
- Expanded Personal Risk: Directors who also act as the company’s primary subject-matter expert (e.g., trader, engineer, or specialist) face a separate, lower threshold for personal liability if they provide misleading information to clients.
- Credentials Matter: Marketing materials that exaggerate or misrepresent an executive’s qualifications or professional affiliations can be a direct basis for personal liability. Calling a chat group a “certified club” proved to be a costly mistake.
- Operational Transparency is Key: Failing to disclose critical, high-risk steps in your business process—in this case, routing funds through a crypto platform—can be deemed a “misleading omission” that creates personal liability for the executive in charge.
THE DETAILS
A Dutch court recently ordered a forex trading company, Xerof B.V., to repay an investor the full €500,000 deposit plus nearly €100,000 in generated profits. The case became particularly insightful when the court also turned its attention to the company’s sole director, who was the individual actually executing the trades. After authorities shut down the operation and seized assets, the investor sued not only the company for breach of contract but also the director personally for the losses. The court’s decision provides a crucial lesson on the dual roles an executive can play and the distinct liabilities that come with each.
The court first examined the issue through the traditional lens of director’s liability. Under Dutch law, holding a director personally liable requires proving they committed a “serious personal fault“—typically by knowingly entering into agreements the company could never honor. In this case, the court found that this high bar for liability was not met, as the investor had not sufficiently proven the director knew from the outset that the company would default. This would normally be the end of the road for a personal claim. However, the court did not stop there, instead analyzing the director’s conduct in her separate capacity as a professional trader.
It was this second analysis that proved fatal for the director. The court found that she had breached her personal duty of care as an expert by providing the investor with misleading information. An informational memo given to the investor contained several inaccuracies: it falsely claimed the director was an “accountant” and a member of an “international certified traders club,” when in reality, she was not an accountant and the “club” was merely a Telegram chat group. Furthermore, the memo completely omitted that investor funds were routed through a cryptocurrency platform before reaching the trading market—a critical piece of information for assessing risk. The court ruled that these misrepresentations and omissions were not just corporate failings but a personal wrongful act by the director in her role as the trading expert, making her directly and personally liable for the damages.
SOURCE
Source: Rechtbank Gelderland
