Banks Face New FX Lawsuit

Just two weeks after the three members of the notorious Bloomberg chatroom The Cartel were acquitted in a New York court of manipulation of FX markets, a group of banks are facing yet another lawsuit from a class action of investors over their FX market activities.

The action has been brought by a group of major investors who explicitly opted out of the class action settlement last year that saw 14 of the 16 banks accused pay over $2.3 billion in damages (a 15thsettled later).

The class includes Allianz Global Investors, Blackrock, BlueCrest Capital Management, Brevan Howard, Calsters, PIMCO, as well as other US state pension plans and three Swedish and one Danish pension funds.

The banks accused are Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, MUFG, Morgan Stanley, Natwest Markets, RBC, RBS, Societe Generale, Standard Chartered Bank and UBS.

Of concern to the banks is a footnote in the lawsuit, which states that the class will be bringing a similar case against the banks in Europe over activities in markets there.

The contents of the lawsuit are familiar to those with knowledge of previous cases and regulatory actions brought against the banks. They are accused of collusion and the inappropriate sharing of information relating to customer activity, attempts to manipulate multiple benchmark fixes, as well as colluding to fix spreads quoted to customers.

The lawsuit also stresses the fact that several of the banks have settled multiple claims against them for similar practice. It states, “Defendants, who together comprise a dominant portion of the FX market, have largely admitted that they colluded to manipulate FX prices. They repeatedly employed every anticompetitive tactic – price fixing, direct communications between competitors, sharing of commercially sensitive information (such as client orders), and other coordinated activity to effectuate their desired market manipulation. This collusion has been thoroughly documented by government regulators from across the globe, who have collectively imposed over $11 billion in fines on Defendants.” (original bold and italics)

The latest class action, while following closely along the lines of previous actions in terms of how it is structured, does diverge in one important factor, the class claiming that the alleged actions took place over a much longer period – from 2003 to 2013. Previous cases focused on the period 2008-13.

Amongst the previous actions cited in the lawsuit a great deal of space is given to the details of the Cartel trial. While the main lawsuit does not mention that the three members of that chatroom on trial were acquitted, a footnote does record the fact. That said, the footnote does attempt to highlight the differences between the actions of the individual traders and the banks by stating, “The higher standard for criminal liability and the role of these individuals’ state of mind, among other things, distinguish the outcome in that trial of individual traders from the claims here against the banks that employed them. As discussed above, each of those bank defendants has already pleaded guilty to criminal charges by the DOJ for conspiring to manipulate the FX market.” 

The latest class action contains further analysis of FX market activity around the Fixes and generally around spreads quoted – it also introduces a new element to these cases by including the CME Settlement Fix in addition to the WM Benchmarks and European Central Bank Fix.

Twitter @lamboPnL

Twitter @Profit_and Loss

Colin Lambert

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