Out-Law News 1 min. read

Nine banks to pay $2 billion to US investors in rate-rigging case

Nine of the world's largest banks have agreed to pay a total of $2 billion in compensation to investors in the US over the manipulation of exchange rates, and to cooperate in litigation against 12 other defendants.

Law firm Hausfeld announced that settlements have been reached with Bank of America, Barclays, BNP Paribas, Citi, Goldman Sachs, HSBC, JPMorgan, RBS, and UBS on behalf of investors.

The banks will now work with the investors in continuing litigation against Credit Suisse Group, Credit Suisse, Credit Suisse Securities, Deutsche Bank, Deutsche Bank Securities, Morgan Stanley, Morgan Stanley & Co, Morgan Stanley & Co. International, Bank of Tokyo-Mitsubishi., RBC Capital Markets, Société Générale and Standard Chartered. Several of these banks were added to the action last month based on facts found during the investigation, Hausfeld said.

The case alleges that the banks conspired to manipulate prices paid in foreign exchange market from 2003 to the present, Hausfeld said.

Anthony Maton, managing partner at Hausfeld in London said: "The extent of collusive conduct in the FX market is now clear. US investors will see compensation from these settlements. Others will not. There is no doubt that anyone who traded FX in or through the London or Asian markets – which transact trillions of dollars of business every day – will have suffered significant loss as a result of the actions of the banks. Compensation for these losses will require concerted action in London."

Hausfeld did not say how much each individual bank is to pay. The settlements have still to be approved, it said.

Earlier this month the UK Serious Fraud Office reported that the first City trader charged as a result of an ongoing criminal investigation into the manipulation of the London Interbank Offered Rate (LIBOR) benchmark had been sentenced to 14 years in prison.

Tom Hayes, a former derivatives trader at UBS and Citigroup, was found guilty of eight counts of conspiracy to defraud by a jury at Southwark Crown Court. Hayes "conspired with numerous other individuals" to procure or submit false or misleading rates into the Yen LIBOR-setting process, the SFO said.

LIBOR is a daily reference rate based on the interest rates at which banks can borrow unsecured funds from other banks. Hayes' offences related to Yen LIBOR, which is the average interest rate at which a large number of banks on the London money market are prepared to lend one another unsecured funds in Japanese yen.

To date the SFO, which investigates and prosecutes the most serious economic crimes, has charged 13 individuals as part of its LIBOR-related investigations.

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