Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Banks charged with conspiring to manipulate prices of SIBOR-, SOR-based derivatives, (Jul 6, 2016)

By Greg Hammond, J.D.

Numerous banks have conspired to rig the prices of financial derivatives that incorporate the Singapore Interbank Offered Rate (SIBOR) and/or the Singapore Swap Offer Rate (SOR), in violation of Section 1 of the Sherman Act and the Racketeer Influenced and Corrupt Organizations Act (RICO), according to a complaint filed in the federal district court in New York City by investment funds FrontPoint Asian Event Driven Fund, L.P. and Sonterra Capital Master Fund, Ltd (FrontPoint Asian Event Driven Fund, L.P. v. Citibank, N.A., July 1, 2016).

SIBOR is a benchmark interest rate that represents the cost of borrowing funds in the Singapore market and reflects the average competitive rate of interest charged on interbank loans denominated in U.S. dollars or Singapore dollars, according to the complaint. Similarly, SOR represents the cost of borrowing Singapore dollars, but based on transactions in foreign exchange swaps—interest rate derivatives that function like a loan—in which two parties agree to exchange Singapore dollars for U.S. dollars on some future date at a price that reflects the current cost of Singapore dollars plus interest.

The investment fund plaintiffs claim that, in June 2013, the Monetary Authority of Singapore uncovered a conspiracy by the defendant banks to rig the prices of financial derivatives that incorporate SIBOR and/or SOR as a component of price. In addition, the U.K. Financial Services Authority found direct evidence of anticompetitive conduct. The plaintiffs claim that subsequent government settlements, factual findings, and admissions demonstrate that the defendants stopped competing and operated a secret cartel to manipulate SIBOR and SOR by submitting artificial interest rate quotes and engaging in manipulative trades to maximize their own profits in SIBOR- and SOR-based derivatives at the expense of the plaintiffs and the class.

The five-count complaint asserts that the defendants engaged in a conspiracy to restrain trade in violation of Section 1 of the Sherman Act by entering into a series of agreements designed to create profit or limit liabilities amongst themselves, including by: coordinating the manipulation of SIBOR and SOR and the prices of SIBOR- and SOR-based derivatives; conspiring to make false SIBOR submissions to the Association of Banks in Singapore designed to artificially suppress, inflate, maintain, or otherwise alter SIBOR; and acting as a trading bloc, engaging in secret, collusive trades in the swap market to manipulate SOR. The supposed conspiracy allegedly caused the plaintiffs and members of the proposed class to be overcharged and underpaid in their SIBOR- and SOR-based derivatives transactions.

The complaint also brought claims for multiple RICO violations, breach of the implied covenant of good faith and fair dealing, and unjust enrichment.

The investment funds seek to represent a class of all persons or entities that engaged in U.S.-based transactions in financial instruments that were priced, benchmarked, and/or settled based on SIBOR and/or SOR at any time from at least January 1, 2007, through December 31, 2011. In addition, the plaintiffs seek permanent injunction, trebled damages plus interest, disgorgement of ill-gotten gains for restitution, prejudgment interest, and costs of suit, including reasonable attorney fees, expenses, and expert fees.

The case is No. 1:16-cv-05263-AKH.

Attorneys: Geoffrey M. Horn (Lowey Dannenberg Cohen & Hart, P.C.) for FrontPoint Asian Event Driven Fund, L.P. and Sonterra Capital Master Fund, Ltd.

Companies: FrontPoint Asian Event Driven Fund, L.P.; Sonterra Capital Master Fund, Ltd.; Citibank, N.A.; Bank of America, N.A.; JPMorgan Chase & Co.; The Royal Bank of Scotland PLC; UBS AG

News: Antitrust RICO NewYorkNews