US judge narrows currency rigging lawsuit against seven banks, but declines to dismiss cases

The US judge overseeing litigation accusing 16 banks of rigging prices in the US$5.3 trillion-a-day foreign exchange market on Tuesday narrowed but refused to dismiss lawsuits against Deutsche Bank, Morgan Stanley, and five other large banks that have yet to settle.

US District Judge Lorna Schofield in Manhattan dismissed antitrust claims against the seven remaining banks arising out of some transactions executed outside the United States, and claims based on transactions conducted before December 1, 2007.

She also dismissed claims under the Commodity Exchange Act for false reporting, and based on transactions conducted on foreign exchanges. Schofield said the remaining claims survived.

The complaint “plausibly pleads both that artificial prices existed on FX exchanges,” causing investors to pay more, “and that this artificiality was caused by defendants’ actions,” Schofield wrote in a 56-page decision.

Investors accused Bank of Tokyo-Mitsubishi UFJ, Credit Suisse, Deutsche Bank, Morgan Stanley, Royal Bank of Canada’s RBC Capital Markets, Societe Generale and Standard Chartered Bank of conspiring to manipulate key foreign currency benchmark rates including the WM/Reuters Closing Spot Rates, or the Fix.

Traders were accused of using chat rooms with names such as “The Cartel,” “The Bandits’ Club” and “The Mafia” to communicate, and manipulating prices through such tactics as “front running,” “banging the close” and “painting the screen.”

RBC had no immediate comment. The other banks declined to comment.

A lawyer for the investors had no immediate comment, saying he was still reviewing the decision.

Last December, Schofield granted preliminary approval to more than $2 billion of settlements with nine other banks over related claims.

These banks included Bank of America, Barclays, BNP Paribas, Citigroup, Goldman Sachs, HSBC, JPMorgan Chase, Royal Bank of Scotland and UBS.