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FX Market Manipulation Case Allowed to Proceed in US Courts

A US judge says that investors may pursue their antitrust litigation against 12 major banks alleging that they manipulated the foreign exchange market.

The banks attempted to have the lawsuit dismissed, arguing that the complaint shows no evidence of “actual harm in real trades in specific currencies on particular days”.

But US District Judge Lorna Schofield of the Manhattan Federal District Court says that the banks conceded during oral argument that any transaction that the plaintiffs entered into with a bank on a day when the London 4pm Fix was manipulated to their detriment would constitute an injury to these parties.

“Defendants' argument based on injury in fact, like their argument based on plausibility, ultimately amounts to demand for specifics that are not required, and that plaintiffs could not reasonably expect to know, at the pleading stage,” Judge Schofield says, adding she also concludes that there was plausibility to the allegation of conspiracy, namely that traders at the banks colluded to manipulate the rates.

The banks argued that the plaintiffs had not alleged harm to competition, a necessity for an antitrust litigation, citing the Libor antitrust case. However, the judge has rejected this argument and therefore the case will be allowed to proceed.

In the same court document Schofield did dismiss two separate foreign complaints against the banks.

The 12 banks named in as the defendants are: JP Morgan, Bank of America, Goldman Sachs, Morgan Stanley and Citi; while the non-US banks included are UBS, Credit Suisse, HSBC, Barclays, the Royal Bank of Scotland, BNP Paribas and Deutsche Bank.

This is the same antitrust case that JP Morgan agreed to settle earlier this month, reportedly for a fee of $100 million (Squawkbox, 7 January). Judge Schofield says that JP Morgan is still currently named as a defendant because the settlement has not yet been approved.

Speaking in a webinar earlier this week, “The FX Crisis: Dealing with Human Risk and Restoring Trust within the FX Market”, Matthew Kulkin, a senior associate at Squire Patton Boggs, warned that there could be further settlements with regards to FX market manipulation.

“It’s certainly not over,” he said. “There still remain ongoing investigations in the US and Europe into benchmark rate manipulation, not just in the FX space but in other rates, and we’re still watching the regulators continue to take a more aggressive line towards enforcement of rules and cracking down on manipulation or other bad actors.”

Kulkin also warned: “The US Congress could easily decide that they want to hold a hearing on benchmark rates and manipulation, which makes for good press coverage and good sound bites on Capital Hill.”    Twitter @Galen_Stops

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