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Two Italian businessmen accuse ECB Governor Lagarde before the EJC: her words caused the 2020 stock market crash



Two Italian entrepreneurs (Aldo D’Agostino and Anna Nardi) have filed a lawsuit before the European Court of Justice against the ECB president, Christine Lagarde, to ask her to compensate them for the loss of all their savings due to an impromptu statement by Lagarde herself on March 12, 2020. For this, D’Agostino demands compensation of EUR 2.8 million (some think around 3 million USD), while Nardi claims damages of EUR 2.03 million (around 2.2 million USD).

That happened on March 12, 2020, in the first pandemic era. The two entrepreneurs had bought in early March 2020 a leveraged security, thus a very high financial risk, called SI FTSE.COPERP, which by contract was able to multiply daily gains as well as losses by seven. If the losses, however, exceeded a certain threshold, the value of the investment would be almost wiped out. And that is exactly what happened on March 12, 2020.

According to them, it was the fault of a famous (and inauspicious) statement by Lagarde, who announced a clean break from the policies of her predecessor, Mario Draghi, as follows: ‘We are not here to reduce spreads; that is not the function of the ECB’. In the hours that followed, stock exchanges all over Europe plummeted, and the Italian one recorded the biggest losses: -16.92%, triggering the zero coupon for the securities of the two entrepreneurs.

In just a few hours, almost all investments were lost. Mr. D’Agostino suffered a loss of EUR 626,134.89 (81.54%). A financial meltdown that obviously undermined the reputation of both of them and created problems with the banks that serviced their businesses. For this reason, the two, in addition to the irreparable loss suffered that day, calculated the subsequent loss of profit (if the collapse had not occurred) and the reputational damage suffered to arrive at the claim figures.

It’s not our fault; it’s the pandemic, baby

The ECB response: blame the pandemic, not Christine – At first, the two forwarded their claim directly to the ECB, which rejected it on the grounds that the collapse of their investment could not be linked to Lagarde’s statement but was undoubtedly due to the outbreak of the COVID pandemic in Italy, which had just decreed the lockdown. Obviously unconvinced by the answer, they turned to the European Court of Justice, which, however, in the first instance on July 25, rejected both appeals as insufficiently motivated.

In their appeal, the two appellants claim that Ms. Lagarde’s words were illegitimate. She spoke about monetary policy personally, whereas only the ECB Governing Council can decide on this matter. At first instance, the court had already replied, “Even if that were the case, where is your subjective right to appeal?” And it also espoused the ECB’s line that the fall in shares in Italy was due to the pandemic and not to Lagarde’s statement. The two plaintiffs had submitted an expert report to show that there was a direct link between the fall in stock market values and Lagarde’s speech, but the court did not accept it as relevant to the decision because it was biased.

Now the court will have to decide on the subject matter of the case. After their defeat in the first instance, the two, however, appealed in the second instance to the Luxembourg-based European court at the end of September, explaining that the report was not biased but sworn and signed by an Italian stock exchange consultant. Enclosed were press clippings and comments by analysts of that day who unanimously attributed the share collapse to the statement (described as a ‘gaffe’) by Lagarde, who was therefore solely responsible for the disintegration of their savings. At the end of November, the court ruled that the appeal was admissible, which will then be discussed again on the merits.

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