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In Major Victory For Gold And Silver Traders, Manipulation Lawsuit Against Gold-Fixing Banks Ordered

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In Major Victory For Gold And Silver Traders, Manipulation Lawsuit Against Gold-Fixing Banks Ordered To Proceed

Back in April, precious metal traders felt vindicated when Deutsche Bank agreed to settle a July 2014 lawsuit alleging precious metal manipulation by a consortium of banks. As a reminder, In July 2014 we reported that a group of silver bullion banks including Deutsche Bank, Bank of Nova Scotia and HSBC (later UBS was also added to the defendants) were accused of manipulating prices in the multi-billion dollar market. The lawsuit, which was originally filed in a New York district court by veteran litigator J. Scott Nicholson, a resident of Washington DC, alleged that the banks, which oversee the century-old silver fix manipulated the physical and COMEX futures market since January 2007. The lawsuit subsequently received class-action status. It was the first case to target the silver fix.

The alleged conspiracy started by 1999, suppressed prices on roughly $30 billion of silver and silver financial instruments traded each year, and enabled the banks to pocket returns that could top 100 percent annualized, the plaintiffs said.

Many expected that this case would never go anywhere and that the defendant banks would stonewall indefinitely: after all their legal budgets were far greater than the plaintiffs.

Which is why so many were surprised to learn six montsh ago that not only had this lawsuit against precious metals manipulation not been swept away, but that the lead defendant, troubled German bank Deutsche Bank agreed to settle the litigation over allegations it illegally conspired with Bank of Nova Scotia and HSBC Holdings Plc to fix silver prices at the expense of investors. Terms of the settlement were not disclosed, but the accord will include a monetary payment by the German bank.

As we reported, at the time, it was clear that "there would have been neither a settlement nor a payment if the banks had done nothing wrong." As Reuters further noted, Deutsche Bank has signed a binding settlement term sheet, and is negotiating a formal settlement agreement to be submitted for approval by U.S. District Judge Valerie Caproni, who oversees the litigation. A Deutsche Bank spokeswoman declined to comment. Lawyers for the investors did not immediately respond to requests for comment.

What was also notable is that in a curious twist, the settlement letter revealed a striking development, namely that the former members of the manipulation cartel had turned on each other. To wit:

“In addition to valuable monetary consideration, Deutsche Bank has also agreed to provide cooperation to plaintiffs, including the production of instant messages, and other electronic communications, as part of the settlement. In Plaintiff’s estimation, the cooperation to be provided by Deutsche Bank will substantially assist Plaintiffs in the prosecution of their claims against the non-settling defendants.”

That was the last time we heard of that particular lawsuit until today, when overnight US District Judge Valerie Caproni dismissed UBS Group AG as a defendant in from the lawsuit.

When dismissing UBS from the settlement, Caproni said this was appropriate because there was nothing showing it manipulated prices, even if it benefited from distortions. "At best, plaintiffs allege that UBS engaged in parallel conduct by offering (along with the fixing members) below-market quotes," Caproni said in her 61-page decision.

However, far more important, was her ruling that investors may pursue antitrust and manipulation claims against Bank of Nova Scotia ("ScotiaBank") and HSBC Holdings Plc, clearing the way for silver manipulation price-fixing litigation.

Caproni said the investors sufficiently, "albeit barely," alleged that Deutsche Bank, HSBC and ScotiaBank violated U.S. antitrust law by conspiring opportunistically to depress the Silver Fix from January 2007 to December 2013. To wit:

Plaintiffs clear the plausibility standard, albeit barely, with respect to their pricefixing and unlawful restraint of trade claims under Section 1 based on allegations that the Fixing Members conspired opportunistically to depress the Fix Price between January 1, 2007 and December 31, 2013.

More importantly, she said the following:

The Fixing Members’ Motion to Dismiss is GRANTED with respect to Plaintiffs’ antitrust claims for price fixing and unlawful restraint of trade from the beginning of the Class Period through December 31, 2006, and from January 1, 2014 through the end of the Class Period. The Fixing Members’ Motion to Dismiss is further GRANTED with respect to Plaintiffs’ manipulative device claims from the beginning of the Class Period through August 15, 2011, and with respect to Plaintiffs’ claims for bid-rigging, and unjust enrichment.

The Fixing Members’ Motion to Dismiss is DENIED with respect to Plaintiffs’ antitrust claims for price fixing and unlawful restraint of trade from January 1, 2007 through December 13, 2013. The Fixing Members’ Motion to Dismiss is further DENIED with respect to Plaintiffs’ price manipulation claims, Plaintiffs’ manipulative device claims after August 15, 2011 and Plaintiffs’ aiding and abetting and principal-agent claims.

As a result, "the Clerk of Court is respectfully directed to close the open motions at docket numbers 73 and 75. Plaintiffs’ deadline to show good cause why leave to replead should be granted is October 17, 2016."

This means that a US Federal Court has found that a lawsuit - the first of its kind - has merit and will now proceed to rule on the following claims versus HSBC and Bank of Nova Scotia:
  • employment of a manipulative device claims
  • bid-rigging, and unjust enrichment.
  • price fixing and unlawful restraint
  • price manipulation claims
  • aiding and abetting and principal-agent claims.
And so the discovery process begins, which will expose just how much market manipulation takes place in the silver (initially as there is a parallel lawsuit taking place with regard to gold) market by major banks. To wit:

The parties, together with the parties in In re Commodity Exch., Inc., Gold Futures & Options Trading Litig., No. 14-md-2548 (VEC), must meet and confer regarding a proposed schedule for discovery and class certification. The parties are required to submit a joint proposal (if possible) or separate proposals (if a joint proposal is not possible) by October 21, 2016. Within that submission the parties must address whether discovery in this case should be consolidated with discovery in In re Commodity Exch., Inc., Gold Futures & Options Trading Litig., No. 14-md-2548 (VEC), and should include any other items they would like to discuss at the October 28, 2016 conference.

Or perhaps not: as Reuters reports, investors plan soon to seek preliminary approval of a settlement, their lawyer Vincent Briganti said on Wednesday. Terms have not been disclosed.

In any case, the judge ruled that "the parties must appear for a pretrial conference on October 28, 2016 at 3:00 p.m. in courtroom 443 of the Thurgood Marshall Courthouse, 40 Foley Square, New York, NY 10007."

The lawsuit is one of many in the Manhattan court in which investors have accused banks of conspiring to rig rates and prices in financial and commodities markets: courtesy of this ruling, alleged "manipulator" banks will now be far more eager to reach a settlement or else risk a full blown discovery process.

The full lawsuit is below.

http://www.zerohedge.com/news/2016-...-approves-manipulation-lawsuit-against-hsbc-s
 

andial

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Sue the crap out of them! One hundred $ silver and a chicken in the oven for all Americans I say!
 

Alton

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Hmmmm.... didn't see JPMorgan's name or Gold In Sachs name mentioned anywhere...
 

JayDubya

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Gee, seems like I've seen this movie before.

Isn't this the one where the bank (in this case HSBC and Bank of Nova Scotia) agrees to pay a fine but denies any wrong doing?
 

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JayDubya

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troubled German bank Deutsche Bank agreed to settle the litigation
Deutsche Bank Pays $38 Million To Settle Silver

http://www.zerohedge.com/news/2016-...38-million-settle-silver-manipulation-lawsuit

Deutsche Bank Pays $38 Million To Settle Silver Manipulation Lawsuit

2016 is shaping up as the year when countless conspiracy theories will be confirmed to be non-conspiracy fact: from central bank rigging of capital markets, to political rigging of elections, to media rigging of public sentiment, and now, commercial bank rigging of silver.

In short, tinfoil hat-wearing nutjobs living in their parents basement have been right all along.
Two weeks ago we reported that "In A Major Victory For Gold And Silver Traders, Manipulation Lawsuit Against Gold-Fixing Banks Ordered To Proceed," however one bank was exempt: Deutsche Bank. The reason why was known since April, when we first reported that Deutsche Bank had agreed to settle the class action lawsuit filed in July 2014 accusing a consortium of banks of plotting to manipulate gold and silver. Among the charges that Deutsche Bank effectively refused to contest were the following:


  • employment of a manipulative device claims
  • bid-rigging, and unjust enrichment.
  • price fixing and unlawful restraint
  • price manipulation claims
  • aiding and abetting and principal-agent claims.

Briganti's affidvait provides some more information on the settlement process:
The negotiations with Deutsche Bank over the material terms of the Settlement took place over several months starting in December 2015 and continuing until the Deutsche Bank Settlement Agreement was executed on September 6, 2016.

Following initial phone calls with Deutsche Bank’s counsel in December 2015, Lowey and Grant & Eisenhofer engaged in lengthy negotiations with Deutsche Bank’s counsel over the material terms of the settlement, including the amount of the settlement consideration, the scope of the cooperation to be provided by the Deutsche Bank Defendants, the scope of the releases, and the circumstances under which the parties would have the right to terminate the settlement.

During the course of the negotiations, Class Counsel presented what we perceived to be the strengths and weaknesses of the claims and defenses, as well as Deutsche Bank’s litigation exposure.
In February 2016, we reached an agreement with Deutsche Bank on the amount of the settlement, subject to the negotiation of other material terms of the deal. For example, given that this is the first settlement in the case, it was our view that the cooperation provisions of the deal were extremely important to our ability to maximize the overall recovery for the class against the Non-Settling Defendants. The negotiations as to the scope of the cooperation provisions continued for several months.

On April 13, 2016, counsel for Deutsche Bank and Class Counsel signed a Binding Settlement Term Sheet (“Term Sheet”). The Term Sheet set forth the terms on which the parties agreed, subject to the negotiation of a full Settlement Agreement, to settle Plaintiffs’ claims against Deutsche Bank. At the time the Term Sheet was executed, Class Counsel was well-informed about the legal risks, factual uncertainties, potential damages, and other aspects of the strengths and weaknesses of the claims and defenses asserted.

By letter dated April 13, 2016, the Parties reported to the Court via ECF that the Term Sheet had been executed, and advised the Court that the Term Sheet would be superseded by a formal settlement agreement. ECF No. 116.

The parties negotiated the Deutsche Bank Settlement Agreement over the course of the next several months. The negotiations over the terms of the Deutsche Bank Settlement Agreement included various material terms over which the parties had substantial disagreement, requiring significant give and take on both sides. To that end, drafts of the Deutsche Bank Settlement Agreement went back and forth between the parties, and numerous contested issues were raised, negotiated and resolved, including without limitation, continuing negotiations over the scope of Deutsche Bank’s cooperation (see ¶ 4(A)-(G)), the scope of the releases (see ¶ 12 (A)-(C)), and the circumstances under which the parties could terminate the Settlement (see ¶ 21).

Thus, the Deutsche Bank Settlement Agreement, which was executed (along with the Supplemental Agreement) on September 6, 2016, was the culmination of arm’s-length settlement negotiations that had extended over many months.

The Deutsche Bank Settlement was not the product of collusion. Before any financial numbers were discussed in the settlement negotiations and before any demand or counter-offer was ever made, we were well informed about the legal risks, factual uncertainties, potential damages, and other aspects of the strengths and weaknesses of the claims against Deutsche Bank.

The Deutsche Bank Settlement involves a structure and terms that are common in class action settlements in this District. The consideration that Deutsche Bank has agreed to pay is within the range of that which may be found to be fair, reasonable, and adequate at final approval.

There was just one thing missing: the settlement amount. This afternoon, that too was revealed when according to court filings, Deutsche Bank had agreed to pay $38 million to settle U.S. litigation over allegations it illegally conspired with other banks to fix silver prices at the expense of investors. The settlement, disclosed in papers filed in Manhattan federal court, concludes one of many recent lawsuits in which investors have accused banks of conspiring to rig the precious metal markets. However, until now there was never any formal closure. Today, that closure cost Deutsche Bank $38 million.

While the amount is tiny for the German bank, now that it is enshrined in case law, it will unleash dozens of similar class action lawsuits, each tweaked a little, and each demanding tens of millions from the gold and silver rigging banks. As Reuters adds, the settlement had been expected since April, though terms had yet to be disclosed. In court papers, lawyers for the investors say the deal will likely be an "ice breaker" that will serve as a catalyst for other banks to settle.

Vincent Briganti, a lawyer for the investors, said the deal provides "substantial monetary compensation plus cooperation from Deutsche Bank in the continued prosecution of this important case against the non-settling defendants."
As a reminder, in the litigation profiled here most recently, investors claimed Deutsche Bank, HSBC Holdings Plc and Bank of Nova Scotia (ScotiaBank) rigged silver prices through a secret daily meeting called the Silver Fix, and accused UBS AG of exploiting that fix. The alleged conspiracy started by 1999, suppressed prices on roughly $30 billion of silver and silver financial instruments traded each year, and enabled the banks to pocket returns that could top 100 percent annualized, the investors said.
Earlier this month, U.S. District Judge Valerie Caproni ruled the investors had sufficiently, "albeit barely," alleged that Deutsche Bank, HSBC and ScotiaBank violated U.S. antitrust law by conspiring to depress the Silver Fix from 2007 to 2013. At the same time, the judge dismissed UBS from the case, saying there was nothing showing it manipulated prices, even if it benefited from distortions.

The Judge added that the investors could amend their complaint, including against UBS, and a lawyer for the investors has said they planned to do so.
So who gets to benefit from the settlement?

We have reason to believe that there are at least hundreds of geographically dispersed persons and entities that fall within the Settlement Class definition. The Settlement Class includes traders of COMEX Silver Futures contracts, anyone who traded in physical silver based on the Silver Fix, and traders in various silver derivatives.

The other beneficiary, of course, is the class of investors, people and "conspiracy theorists" who claimed all along that gold and silver were subject to rigging in various forms throughout the years. Well, you were right. However, we wouldn't hold much hope for getting any substantial monetary rewards. By the time the settlement is done, there will likely be a few hundred dollars per claimant.

The good news, however, is that this will only unleash many more such lawsuits, now that the seal has been broken.
As for the remaining two banks in the class action, HSBC and Bank of Nova Scotia, the next pretrial conference in that lawsuit which was greenlighted two weeks ago is scheduled for October 28, 2016. Those who wish to be present should appear at 3:00 p.m. in courtroom 443 of the Thurgood Marshall Courthouse, 40 Foley Square, New York, NY 10007.