Large group of institutional investors drag 16 major banks to court over rigging forex market

The 221 page complaint alleges that these 16 major banks had colluded to rig the roughly $5.1 trillion-a-day foreign exchange market.

In a significant development, a group of big institutional investors, which includes BlackRock Inc and Allianz SE’s Pacific Investment Management Co, has filed a lawsuit against sixteen 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. These settlements followed worldwide regulatory probes that have led to more than $10 billion in fines for several banks, and the convictions or indictments of a handful of traders.

The banks against which the lawsuit have been filed include Goldman Sachs, Morgan Stanley, Barclays, Bank of America, Credit Suisse, BNP Paribas, Deutsche Bank, Citigroup, Japan’s MUFG Bank, HSBC, Royal Bank of Canada, JPMorgan Chase, Societe Generale, Royal Bank of Scotland, UBS and Standard Chartered.

Incidentally, investors typically opt out of litigation when they hope to recover more money by suing independently.

The lawsuit accuses the banks of violating U.S. antitrust law by conspiring to rig currency benchmarks from 2003 to 2013, by sharing confidential orders and trading positions.

The lawsuit alleges that these banks managed to pull off these alleged manipulations through chat rooms with names such as “The Mafia”, “The Cartel,” and “The Bandits’ Club”. The tactics that was used included names such as “front running,” “painting the screen” “taking out the filth” and “banging the close”.

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

Incidentally, Norway’s central bank Norges Bank and the big public pension fund California State Teachers’ Retirement System (CalSTRS) are among the plaintiffs.

According to a footnote in the complaint, many of the plaintiffs plan on pursuing similar litigation in London against many of the bank defendants with respect to trades in Europe.

Citigroup’s $402 million settlement is the largest in the earlier litigation.

Credit Suisse has yet to settle that case. Neither of them had an immediate comment to make on the latest 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.

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