Facebook will be compensated by NASDAQ OMX Group, which has agreed to pay $26.5 million to write off the class-action lawsuit, according to Reuters. The lawsuit relates to the social network’s $16 billion IPO, which was marred by a technological glitch that stalled the process.

Facebook Inc IPO Lawsuit To Be Settled By NASDAQ For $26.5M

First of its kind settlement

In the lawsuit, it was mentioned that NASDAQ breached federal and state laws by keeping technology weakness in IPO systems under wraps and failing to design and test them for the Facebook IPO. NASDAQ Chief executive officer Robert Greifield said the settlement should bear the least effect on the exchange’s immunity. The stock exchange mentioned that it has put aside $31 million for litigation arising from Facebook’s IPO. Greifield added that the organization is happy to get over this issue and that insurance will cover most of the cost.

This is a first of its kind settlement and holds importance as it is the responsibility of the exchanges to supervise their own market. Vincent Cappucci, one of the lawyers representing retail investors harmed in the IPO, mentioned, “This is the first case that we are aware of where a class of investors has sued an exchange for market disruption, and the court has sustained those claims.”

Facebook retail investors to be compensated

May 18, 2012, the day of Facebook’s IPO, saw technical problems delaying the opening, and as a result, thousands of orders got stuck in NASDAQ’s system for hours. The end result was that market-making firms sustained an estimated $500 million loss, and in the year 2013, NASDAQ voluntarily repaid around $41.6 million to them.

However, Facebook retail investors who executed their order through brokers were not eligible for compensation. According to Cappucci, Thursday’s settlement is a “very favorable percentage” to compensate the losses of the investors.

UBS’ market-making arm filed the case to recover more than $350 million of losses from the IPO instead of submitting the claims to NASDAQ. In October, UBS’ bid was turned down by an appeals court. Greifield said that now UBS is becoming a part of the accommodation policy and that NASDAQ is happy to open it up again for them.