Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Foreign commercial banks charged with collusion to manipulate gold prices, (Mar 25, 2014)

By Linda O’Brien, J.D., LL.M.

An consumer has filed a complaint in the federal district court of New York City on behalf of a putative class of individuals and entities that directly traded gold and gold derivatives with certain foreign commercial banks on an exchange in the United States, alleging that the banks colluded to manipulate the London Gold Market Fixing Ltd. price-setting process for their own profit (Barker v. Bank of Nova Scotia, March 20, 2014).

Bank of Nova Scotia, Barclays Bank PLC, Deutsche Bank, AG, HSBC Holdings PLC, and Societe Generale are foreign commercial financial services companies that own and are members of the London Gold Market Fixing Ltd. (“London Gold Fix”). The financial institutions participate each trading day in a twice-daily price-setting and reporting process for gold and gold derivatives. Oliver Barker is a consumer who has engaged in transactions for the purchase and sale of gold on an exchange in the United States.

The reports of the London Gold Fix are the most important daily information to the worldwide market’s setting of gold prices. The five financial institutions, as members of the London Gold Fix, were in a position to manipulate the price-setting process to guarantee profits for themselves on proprietary trade in gold and gold derivatives, according to the complaint.

The complaint states that, in 2004, anomalous movements in gold prices were observed and coincided with a change in the composition of the London Gold Fix membership. Statistical analysis indicated unusually large spikes of spot gold prices consistently occurred during the time when the daily PM Fix was determined. The pattern was not explained by news flow, fundamental analysis, or other factors. Also, significant movement in gold prices registered at the time of the daily PM Gold Fix have also occurred on days of expirations of options on the Commodity Exchange (COMEX), a large exchange in the United States on which gold contracts and derivatives are traded.

Regulatory agencies from at two foreign countries have commenced investigations into gold and silver price manipulation. The defendant financial institutions have also been investigated in connection with allegations of manipulation of the LIBOR rates.

The financial institutions, through their membership in the London Gold Fix, allegedly conspired with one another and with others in order to manipulate prices of gold and gold derivative contracts. As a result of the financial institutions unlawful conduct, Barker purchased and sold gold at artificial prices and suffered damages, the complaint alleges.

Barker asserts claims for unjust enrichment, restitution, and violations of Section 1 of the Sherman Act and Section 16 of the Clayton Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 14 CV 1964.

Attorneys: Fred Taylor Isquith (Wolf Haldenstein Adler Freeman & Herz LLP) and Marc S. Henzel (Law Offices of Marc S. Henzel) for Oliver Barker

Companies: Bank of Nova Scotia; Barclays Bank PLC; Deutsche Bank, AG; HSBC Holdings PLC; Societe Generale

News: Antitrust NewYorkNews