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Bank of America Corp., Barclays PLC, Standard Chartered PLC, BNP Paribas Fortis SA/NV, and UBS Group AG, and entities related to each bank, are out of a suit alleging price fixing in the silver market.
U.S. District Court for the Southern District of New York Judge Valerie Caproni held July 25 that chatroom transcripts showing those big banks “episodically” conspired to fix the silver market wasn’t enough to sustain a lawsuit by options and futures traders.
The plaintiffs lack antitrust standing to bring suit against the banks because they weren’t close enough to the losing end of the trades that were rigged, Caproni said.
Caproni’s decision doesn’t preclude other plaintiffs, who might have directly traded with the big banks in the silver market, from bringing their own lawsuit alleging they were victimized by the banks’ conduct.
The plaintiffs also can continue litigation against HSBC and Bank of Nova Scotia, which set the benchmark price for silver along with Deutsche Bank. Deutsche Bank settled for $38 million in 2016. The case against HSBC and Bank of Nova Scotia will continue in discovery.
The plaintiffs’ original complaint alleged that the three banks responsible for setting the benchmark used its auction format as cover for systematically driving down the price of silver.
Until 2014, the price of silver futures was based on the benchmark called “London silver fixing.” The fixing banks — Deutsche Bank, HSBC, and Bank of Nova Scotia — would agree on the price of silver during a private conference call held daily at noon London time.
The process was abandoned after widespread allegations that many benchmarks had been manipulated by the interested banks setting the rates.
The plaintiffs, individuals, and entities that bought or sold silver futures contracts, sued the fixing banks and UBS in 2014, alleging they rigged the benchmark process. Caproni earlier dismissed claims against UBS because she said the plaintiffs had no solid evidence that UBS was involved in a scheme, even though it was a big player in the market.
When Deutsche Bank settled, it handed a trove of chatroom transcripts from its silver traders to the plaintiffs. Based on those transcripts, the plaintiffs filed a new complaint that expanded their claims and added banks, including UBS, to the defendant list.
Caproni’s July 25 decision dismissed those added, broader claims, which included allegations of an “overarching conspiracy” among all the trading banks to rig the silver markets and claims that the banks rigged specific trades.
Caproni concluded that those broader claims fail for two reasons. First, the plaintiffs’ allegations of an overarching conspiracy are “implausible,” she said. The other banks weren’t part of the noon phone call, and the episodic evidence of their communications with the fixers isn’t enough to meet the legal burden of proof.
Second, the plaintiffs can show “episodic” conspiracies to manipulate the immediate cash market, but they weren’t the victims of those rigged trades because they were only involved in the futures and options markets.
The chat messages from Deutsche Bank are “paradigmatic examples of communications relevant to a horizontal price-fixing scheme” in the silver market, Caproni said, but these plaintiffs “did not deal directly with the defendants.”
“There is often a more directly injured victim available,” she said, and antitrust remedies are reserved for that victim.
UBS also won its bid the same day to stay out of a separate case alleging gold price fixing. Caproni held in that action that the Deutsche Bank chatroom transcripts, added to gold traders’ complaints, weren’t enough to tie UBS to the alleged “PM gold fixing” conspiracy because UBS isn’t a fixing bank for that benchmark.
Using 16 fragments of chat transcripts between a UBS trader and one at Deutsche Bank, the plaintiffs tried to show that UBS knew about rigging in the gold fix and benefited from it. The plaintiffs also added two new statistical analyses they said support an inference that UBS was in on rigging the PM gold fixing.
Caproni rebuffed those theories. “The gold fixing was a self-contained process, involving only the fixing banks. Because the fixing banks had complete control over the process, UBS’s involvement was not necessary to the scheme and would not have been to the conspirators’ benefit,” she said.
She granted UBS’s motion to dismiss claims against the bank in the revised gold fixing complaint.
The gold case is In re Commodity Exch., Inc., Gold Futures & Options Trading Litig. , S.D.N.Y., No. 14-md-02548-VEC, 7/25/18 .
The silver case is In re London Silver Fixing, Ltd., Antitrust Litig. , 2018 BL 264988, S.D.N.Y., No. 14-md-02573-VEC, 7/25/18 .
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