New York City, USA : A group of large institutional investors including BlackRock Inc and Allianz SE’s Pacific Investment Management Co has sued 16 major banks, accusing them of rigging prices in the roughly $5.1 trillion-a-day foreign exchange market.
The lawsuit was filed on Wednesday in the U.S. District Court in Manhattan by plaintiffs that decided to “opt out” of similar nationwide litigation that has resulted in $2.31 billion (£1.76 billion) of settlements with 15 of the banks.
Those settlements followed worldwide regulatory probes that have led to more than $10 billion of 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.
The plaintiffs in Wednesday’s lawsuit accused the banks of violating U.S. 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,” the 221-page complaint said.
Norway’s central bank Norges Bank and the big public pension fund California State Teachers’ Retirement System (CalSTRS) 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 $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.
The case is Allianz Global Investors GMBH et al v Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 18-10364.
In related legal and finance news UBS says it expects to be sued by U.S. Justice Department over crisis-era mortgage securities.
UBS expects to be sued by U.S. Justice Department over crisis-era mortgage securities
UBS Group AG, Switzerland’s largest bank, said it expects to be sued by the U.S. Department of Justice as early as Thursday on civil charges related to the sale of mortgage-backed securities in the run-up to the 2008 global financial crisis, according to a company statement.
The bank said the claims were not supported by the facts or the law and it would contest any such complaint “vigorously.”
The U.S. Department of Justice did not immediately respond to a request for comment.
UBS said the Justice Department advised the bank that it intends to file the lawsuit. It anticipates the Justice Department will seek unspecified monetary penalties stemming from mortgage securities which date back to 2006 and 2007.
The lawsuit against UBS, a small originator of U.S. residential mortgages at the time, is among the last actions over misconduct in the sale and pooling of mortgage securities which helped to cause the financial crisis.
In recent years, the Justice Department has settled similar claims with Citigroup Inc, Deutsche Bank AG, JPMorgan Chase & Co, Credit Suisse Group AG, Morgan Stanley, Goldman Sachs Group Inc, Bank of America Corp and Barclays Plc.
Barclays settled for $2 billion in March after resisting a penalty the U.S. government sought near the end of the Obama administration in 2016. Justice had sought a much higher fine at the time and, when the two sides could not come to terms, the department filed a lawsuit.
More recently, HSBC Holdings Plc agreed to pay $765 million in October to settle with the Justice Department over its sale of defective mortgage securities before the crisis, while major player Royal Bank of Scotland Group Plc reached a $4.9 billion deal in May.
After the crisis, banks were accused of deceiving investors about the quality of loans underlying the mortgage-backed securities they pooled and sold, with loans made to borrowers with no ability to repay them and based on inflated home appraisals.
UBS, which originated $1.5 billion of U.S. residential mortgages in a $5 trillion market, lost more than $45 billion when the housing market collapsed.