Australia has become the latest location for a class action lawsuit against a group of banks with a law firm filing a cartel class action in the Australian Federal Court claiming the banks “systematically manipulated foreign exchange rates to boost profits at the expense of Australian businesses and investors”.
In what has become a familiar pattern around the world, the action has been brought against UBS, Barclays, Citibank, Royal Bank of Scotland and JP Morgan, claiming the banks colluded to rig foreign exchange rates during the period between 1 January 2008 and 15 October 2013. It refers to FX traders using chat rooms such as “The Cartel”, “The Bandits’ Club” and The Mafia” (it should be noted that regulatory action against the banks in Europe highlighted that at no time was a chat room actually called “The Cartel”) to share information and “coordinate the manipulation of FX benchmark rates, control the pricing of spreads and to trigger client stop loss orders and limit orders”.
Principal lawyer at law firm Maurice Blackburn, which is bringing the action, Kimi Nishimura, notes that the conduct has been the subject of extensive regulatory and private enforcement action in the USA and Canada and says, “Australian businesses and investors – particularly medium to large importers, exporters, institutional investors and businesses with operations overseas – have been affected by the distortion of the FX market by these banks. Such cartel behaviour cheats Australian businesses in circumstances where they may already have been vulnerable to currency fluctuations.
“These cases are hard and complex to bring but that doesn’t mean that wrongdoing on a mass scale such as this should go unchecked,” she adds. “As the only Australian law firm to have run and won cartel class actions, we are well placed to run this case.”
The action is on behalf of foreign exchange customers that traded FX spot and forwards between 1 January 2008 and 15 October 2013, and whose total value of transactions exceeded $500,000 over that period. The case will be represented by lead plaintiff J. Wisbey and Associates who imported dental and medical equipment during the period. “Australian businesses shouldn’t pay more because the banks got together to work out how to make more profits for themselves. It’s hard to take individual action against this kind of price rigging because the price increases are small, but when repeated over thousands of transactions they make a real difference to currency prices,” says Greg Wisbey, managing director at the firm. “I rely on forex trading because my business needs to trade with international companies, but to have been subjected to an uneven playing field and paying an inflated price for no good reason, well that’s just unfair and hurts Australian businesses like mine.”
With the banks also facing class actions over this issue in the US and Europe, the chances are that the final pay out will be far in excess of the $2.4 billion currently paid out by banks to settle claims. Earlier this month same group of banks (plus Japanese bank MUFG) were also hit with a regulatory sanction by the European Union for the same conduct in chat rooms, although UBS escaped having to pay up as it revealed the conduct to the EU’s regulators.