Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Virgin Islands challenges alleged manipulation of foreign currency market, (Jan 3, 2014)

By Linda O’Brien, J.D., LL.M.

The Government of the Virgin Islands has filed a class action complaint in the federal district court of Manhattan, New York, charging that major financial institutions committed federal antitrust violations, among other claims, through their manipulation of the foreign currency market (Employees’ Retirement System of the Government of the Virgin Islands v. Barclays Banks, December 26, 2013).

The Employees’ Retirement System of the Government of the Virgin Islands (Virgin Islands) is a defined benefit pension plan for officials and employees of the Government of the Virgin Islands and their beneficiaries. The foreign exchange (FOREX) is the largest over-the-counter market in the world where brokers and dealers of currencies negotiate directly without using a central exchange or clearing house. Participants in the FOREX market include large banks, pension funds, institutional investors, currency speculators, corporations, governments, and retail investors. The WM/Reuters Closing Spot Rates service provides a standardized method for determining daily benchmark exchange rates for 160 different currencies. The rates are published hourly (on the half hour for 21 currencies), and the benchmarks are the median of all trades conducted in a minute-long period, starting 30 seconds before the beginning of each half-hour. The Virgin Islands has participated in the FOREX market and has engaged in FOREX transactions.

The complaint alleges that the defendants—Barclays Bank PLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, The Goldman Sachs Group, Inc., JPMorgan Chase & Co., National Association, The Royal Bank of Scotland Group, PLC, UBS AG and HSBC Bank USA, N.A.—engaged in a global conspiracy to manipulate the market in foreign currency by rigging the market for exchange rates. The defendants colluded to manipulate the currency daily snapshots of trading used globally by investment managers to value portfolios (“fixes”) in order to maximize profits and minimize losses.

The financial institutions and their senior traders pushed through trading orders during pricing windows to manipulate the FOREX prices. The defendants also routinely shared information about client orders, through instant messages and chat rooms, and agreed to the sequence for placing trades to manipulate the FOREX market to their advantage. The concerted manipulation allowed traders to rig the WM/Reuters rates by pushing through large numbers of trades before and during the 60-second measurement windows when the benchmarks were set, according to the complaint.

Anticompetitive practices and manipulation of the WM/Reuters rates are subject to ongoing investigations by regulators in the United States, Europe, and Asia. The manipulative conduct undermined how currency was valued and affected the value of currencies, funds, and derivatives worldwide. The complaint alleges that the Virgin Islands engaged in foreign currency transactions with one or more of the defendants from January 2006 to the present.

The Virgin Islands asserts claims for unjust enrichment, 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, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The case is No. 1:13-cv-09125.

Attorneys: David A. Rosenfeld (Robbins Geller Rudman & Dowd LLP) for Employees’ Retirement System of the Government of the Virgin Islands.

Companies: Barclays Bank PLC; Citigroup Inc.; Citibank, N.A.; Credit Suisse Group AG; Credit Suisse Securities (USA) LLC; Deutsche Bank AG; The Goldman Sachs Group, Inc.; JPMorgan Chase & Co.; JPMorgan Chase Bank; National Association; The Royal Bank of Scotland Group, PLC; UBS AG; UBS Securities LLC; HSBS Holdings PLC; HSBC Bank USA, N.A.

News: Antitrust NewYorkNews