Foreign exchange market

HSBC, Standard Chartered among 16 banks being sued by big investors in US over currency market rigging

  • BlackRock and Allianz SE’s Pacific Investment Management among plaintiffs opting out of similar litigation that has resulted in US$2.31 billion in settlements with 15 of the banks
PUBLISHED : Thursday, 08 November, 2018, 1:04pm
UPDATED : Thursday, 08 November, 2018, 1:56pm

A group of large institutional investors that includes BlackRock and Allianz SE’s Pacific Investment Management has sued 16 major banks, accusing them of rigging prices in the about US$5.1 trillion a day foreign-exchange market.

The lawsuit was filed on Wednesday in the US District Court in Manhattan by plaintiffs that decided to “opt out” of similar nationwide litigation that has resulted in US$2.31 billion in settlements with 15 of the banks.

These settlements followed worldwide regulatory investigations that have led to more than US$10 billion in fines for several banks, and the convictions or indictments of some traders.

The banks being sued are Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Japan’s MUFG Bank, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered and UBS.

Investors typically opt out of litigation when they hope to recover more by suing on their own.

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The plaintiffs in Wednesday’s lawsuit accused the banks of violating US antitrust law by conspiring from 2003 to 2013 to rig currency benchmarks, including the WM/Reuters Closing Rates, for their own benefit by sharing confidential orders and trading positions.

This manipulation was allegedly done through chat rooms with such names as “The Cartel”, “The Mafia” and “The Bandits’ Club”, through tactics with such names as “front running”, “banging the close”, “painting the screen” and “taking out the filth”.

“By colluding to manipulate FX prices, benchmarks and bid/ask spreads, defendants restrained trade, decreased competition and artificially increased prices, thereby injuring plaintiffs,” according to a 221-page complaint.

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Norway’s central bank Norges Bank and the big public pension fund California State Teachers’ Retirement System are among the several other named plaintiffs.

Many of the plaintiffs plan to pursue similar litigation in London against many of the bank defendants with respect to trades in Europe, a footnote in the complaint said.

Citigroup’s US$402 million settlement is the largest in the earlier litigation. Credit Suisse has yet to settle that case. Neither had an immediate comment on Wednesday’s lawsuit.

The law firm Quinn Emanuel Urquhart & Sullivan represents the opt-out investors.