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Judge Dismisses Some Claims Against Major Banks Accused of Rigging Prices

September 21, 2016

Morgan Stanley Shares Surge Most in Two Years on Trading GainsMorgan Stanley Shares Surge Most in Two Years on Trading Gains
Morgan Stanley is one of several major banks involved in a recent federal lawsuit filed by investors.Photograph by Scott Eells—Bloomberg via Getty Images

The U.S. judge overseeing litigation accusing 16 banks of rigging prices in the $5.3 trillion-a-day foreign exchange market on Tuesday narrowed, but refused to dismiss lawsuits against Deutsche Bank (DB), Morgan Stanley (MS), and five other large banks that have yet to settle.

U.S. district judge Lorna Schofield in Manhattan dismissed antitrust claims in a class action brought by investors against the seven remaining banks arising out of some transactions executed outside the U.S., and claims based on transactions conducted before Dec. 1, 2007.

She also dismissed claims under the Commodity Exchange Act for false reporting and based on transactions conducted on foreign exchanges. Schofield said the remaining claims survived.

The complaint “plausibly pleads both that artificial prices existed on FX exchanges,” causing investors to pay more, “and that this artificiality was caused by defendants’ actions,” Schofield wrote in a 56-page decision.

 

Investors accused Bank of Tokyo-Mitsubishi UFJ, Credit Suisse, Deutsche Bank, Morgan Stanley, Royal Bank of Canada’s RBC Capital Markets (RY), Societe Generale, and Standard Chartered Bank of conspiring to manipulate key foreign currency benchmark rates including the WM/Reuters Closing Spot Rates, or the Fix.

Traders were accused of using chat rooms with names such as “The Cartel,” “The Bandits’ Club,” and “The Mafia” to communicate, and manipulating prices through such tactics as “front running,” “banging the close,” and “painting the screen.”

RBC had no immediate comment. The other banks declined to comment.

Lawyers for the investors, Christopher Burke and Michael Hausfeld, in an emailed statement said, “By our estimation, the opinion places the class in an excellent posture and we look forward to its further prosecution.”

Last December, Schofield granted preliminary approval to more than $2 billion of settlements with nine other banks over related claims.

These banks included Bank of America (BAC), Barclays (BCS), BNP Paribas, Citigroup (C), Goldman Sachs, HSBC (HSBC), JPMorgan Chase (JPM), Royal Bank of Scotland, and UBS (UBS).

The case is In re: Foreign Exchange Benchmark Rates Antitrust Litigation, U.S. District Court, Southern District of New York, No. 13-07789.