Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Financial services firms charged with conspiring to manipulate platinum and palladium prices, (Jan 26, 2015)

By Linda O’Brien, J.D., LL.M.

Three financial services companies and a chemical company colluded to manipulate and rig the global benchmarks for platinum and palladium and related financial derivative products, known as the Platinum and Palladium Fixings, on the New York Mercantile Exchange in the United States, according to a complaint filed in the federal district court of New York City (White Oak Fund LP v. BASF Metals Limited, January 21, 2015).

Banking and financial services companies Goldman Sachs, HSBC Bank, and Standard Bank and chemical company BASF Metals Limited are members of the London Platinum and Palladium Market (LPPM) and the Platinum and Palladium Fixings. White Oak Fund LP, a private placement fund, has engaged in transactions for the purchase of platinum and palladium futures, options futures contracts, and related financial derivative products on the New York Mercantile Exchange (NYMEX).

The London Platinum and Palladium Fixing Company (LPPFC) administered and published the Platinum and Palladium Fixings until October 2014. The Fixings occur twice daily by teleconference. During each fixing call, the fixing members set the global prices of physical platinum and palladium, which in turn, directly impacts the prices of platinum and palladium-based financial products, such as platinum and palladium futures and options.

The complaint states that, although the defendants are competitors and have their own proprietary trading interests, they discussed their trading strategies and customer orders prior to the Fixing calls. They were privy to and shared confidential information about client purchase and sale orders that allowed them to glean information about the direction of platinum and palladium prices, the lawsuit charges. Consequently, the defendants allegedly had the ability to execute trades in physical platinum and palladium and platinum and palladium-based financial products in advance of those movements. They used the information gathered from their discussions to manipulate the prices for physical platinum and palladium and reap substantial profits, the plaintiffs claimed.

An analysis of the market between 2007 and 2014 revealed the defendants’ manipulation of platinum and palladium prices. The plaintiff retained economic and financial products experts for the purpose of analyzing platinum and palladium trading around and during the afternoon Platinum and Palladium Fixing, when most of the platinum and palladium trading in the United States occurs. The analyses pointed to anomalous price moves in the market suggesting that platinum and palladium prices were being manipulated by the defendants, according to the complaint.

Several regulatory agencies from around the world have commenced investigations into the setting of gold prices, another precious metal whose price setting process is nearly identical to that of platinum and palladium. Increased scrutiny of benchmarks has led to legislative action in the European Parliament concerning the integrity of widely-used benchmarks like the fixings for gold, silver, platinum, and palladium. The proposed legislation would help protect consumers and investors by ensuring the financial benchmarks are reliable.

The defendants allegedly were able to affirmatively conceal their conspiracy by engaging in secret communications to discuss customer orders and coordinate trading strategies. The plaintiffs could not have discovered the defendants’ conspiracy through reasonable due diligence because the discussions and activities during the platinum and palladium fixing calls were not public information. As a result of the self-concealing nature of the conspiracy, the statute of limitations was tolled for the plaintiff’s claims, the complaint alleged.

White Oak Fund asserts claims for unjust enrichment, principal-agent liability, and aiding and abetting in violation of Section 1 of the Sherman Act and the Commodity Exchange Act. The action seeks declaratory and injunctive relief, treble damages, pre-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:15-cv-00436-UA.

Attorneys: Brian P. Murray, Lee Albert, and Gregory B. Linkh (Glancy Binkow & Goldberg LLP) for White Oak Fund LP.

Companies: White Oak Fund LP; BASF Metals Limited; Goldman Sachs International; HSBC Bank USA, N.A.; Standard Bank Plc

News: Antitrust NewYorkNews