NY Judge to hear major banks’ arguments in Swiss franc LIBOR manipulation case

Judge Sidney H Stein of the New York Southern District Court has scheduled a hearing in a Swiss franc LIBOR manipulation case targeting major financial institutions like Credit Suisse, UBS, Deutsche Bank AG, and the Royal Bank of Scotland.

The list of plaintiffs in this case includes Sonterra Capital Master Fund Ltd., FrontPoint European Fund, L.P., FrontPoint Financial Services Fund, L.P., Hunter Global Investors Fund I, L.P., Frank Divitto, and the California State Teachers’ Retirement System. The plaintiffs represent a class of persons or entities that engaged in US-based transactions in financial instruments that were priced, benchmarked, and/or settled to Swiss franc LIBOR at any time from at least January 1, 2001, through at least December 31, 2011.

The plaintiffs allege that, for at least ten years, the defendants, some of the world’s largest banks and brokers, conspired to rig the global market for foreign exchange and interest rate derivatives that were priced, benchmarked, and/or settled based on Swiss franc LIBOR, increasing their profits at the expense of the plaintiffs and the class.

According to the Plaintiffs’ Complaint, the defendants are horizontal competitors. They compete to provide market making services for Swiss franc LIBOR-based derivatives, purchasing, selling, and transacting in those same derivatives, in addition to competing in other aspects of their business. However, instead of competing during the Class Period, the banks agreed to fix prices and engaged in other unlawful acts which injured competition. The defendants’ agreement involved a comprehensive strategy aimed at manipulating the prices of Swiss franc LIBOR-based derivatives both at the outset of each transaction when these financial instruments were purchased or sold, and later when their prices were “reset” at predetermined intervals (e.g., every three months) based on Swiss franc LIBOR.

The complaint also alleges that, UBS, RBS, JPMorgan, Credit Suisse, and Deutsche Bank, which each held a seat on the British Bankers Association (“BBA”) Swiss franc LIBOR panel (collectively the “Contributor Bank Defendants”), generated additional illicit profits by coordinating their efforts to rig Swiss franc LIBOR, the interest rate used to price, benchmark and/or settle these same financial instruments. By rigging Swiss franc LIBOR, the defendants are said to have controlled the prices of Swiss franc LIBOR-based derivatives throughout the Class Period, allowing the defendants to further injure competition by tipping the market in their favor every trading day.

By conspiring, these competitors generated exponentially more revenue than they would have through honest competition, directly causing substantial damages to Class members, the plaintiffs say in the complaint. As one RBS derivatives trader put it, “its just amazing how libor fixing can make you that much money.”

The defendants have challenged the complaint. According to their motion to dismiss, the complaint should be nixed for lack of personal jurisdiction, as to Credit Suisse Group AG and DB Group Services (UK) Limited because of lack of venue, and, as to all Original Defendants, because it fails to state a claim upon which relief can be granted and the Court lacks subject matter jurisdiction over the claims asserted.

The Court will hear oral argument on Defendants’ Motion to Dismiss the Second Amended Class Action Complaint on August 8, 2019, at 10:30 a.m.