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Banks Face More Legal Action – This Time Over Sibor

Three years after the Monetary Authority of
Singapore (MAS) sanctioned
20 banks and 133 traders
over breaches in good conduct regarding the local
interest rate fixing (Sibor), two US investment funds filed a class action lawsuit
in New York on Friday (July 1) alleging “
a massive conspiracy” to rig interest rates.

The two funds, FrontPoint Asian Event Driven Fund and Sonterra
Capital Master Fund, have filed a lawsuit in New York against a number of banks
and subsidiary organisations including ANZ, BNP Paribas, Bank of America, Bank
of Tokyo-Mitsubishi, Barclays, Citi, Commerzbank, Credit Agricole, Credit
Suisse, DBS, Deutsche Bank, HSBS, ING, JP Morgan, Macquarie Bank, OCBC, Royal
Bank of Scotland, Standard Chartered Bank, UBS and UOB.

In what has become a
familiar pattern in these cases, the filing cites an MAS finding that traders
from different institutions contacted each other over electronic messaging to
discuss their own submissions to the rate set process.

The lawsuit claims
that, “government settlements, factual findings, and admissions, demonstrate
that Defendants stopped competing during the Class Period and operated a secret
cartel to manipulate Sibor and SOR by, inter alia, submitting artificial
interest rate quotes and engaging in manipulative trades, to maximise their own
profits in Sibor- and SOR-based derivatives at the expense of Plaintiffs and
the Class.”

Although the rate
setting and alleged conduct took place in an offshore centre, the lawsuit makes
a case that manipulative conduct took place within the US because the defendants,
“caused false Sibor and SOR rates, trade confirmations incorporating these
false rates, and communications containing requests to manipulate these rates
to be distributed over US wires using servers located in the United States.”

FrontPoint says it
transacted interest rate swap transactions with some of the defendants and
Sonterra that it traded forward FX contracts – both are claiming that they were
underpaid or over-charged as a result of the alleged manipulation.

The two funds are
claiming treble damages in the class action, although they do not specify how
much the alleged manipulation cost them, merely stating that the plaintiffs
“similarly situated” members of the class “have been damaged as alleged herein
in an amount to be proven at trial.”

Colin_lambert@profit-loss.com

Twitter @lamboPnL

Twitter
@Profit_and_Loss

Colin Lambert

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