Naturally the big four banks being sued in a New York court over rate fixing manipulation by a couple of US hedge funds and another big investor grabbed headlines this morning. Here’s how Fairfax reported it

“The complaint accuses the five-strong cohort of Australia’s financial institutions of racketeering, wire fraud and collusion under America’s Racketeer Influenced and Corrupt Organisations Act (or the RICO Act) and notes the alleged rigging had a ‘reasonably foreseeable effect on United States’ domestic commerce’.

“Florida-based derivative trader Richard Dennis — who is speculated to be the famed trader known as the ‘prince of the pit’ — and hedge fund Sonterra Capital Master Fund and Frontpoint Financial Services filed the claim.”

Naturally our banks (Macquarie is the fifth after Westpac, ANZ, NAB and CBA) deny the claims and say they will fight them. The other banks that are defendants in the action are Citibank, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland and UBS. International broking houses ICAP and Tullett Prebon are also named. The Australian Securities and Investments Commission settled claims with UBS, RBS, and BNP Paribas over alleged BBSW (bank bill swap rate) manipulation in 2013 and 2014.

But a bit of research of the two hedge funds finds a case reported in early July involving the duo in a similar action in Singapore over a 2013 rigging claim made by the Monetary Authority of Singapore against a group of banks, many of which are in the above list.

According to a Reuters report in Fortune magazine, named in the Singapore legal action are Citigroup, Bank of America, JP Morgan, RBS, UBS, UBS, ING, BNP Paribas, Overseas Chinese Banking Corporation, Barclays, CreditSuisse, Credit Agricole, Credit Sussie, Standard Chartered, DBS, Mitsubishi Ufi, HSBC, Macquarie and Commerzbank. Richard Dennis is not involved in the Singapore suit, which:

“… as filed by Greenwich, Connecticut-based FrontPoint Asian Event Driven Fund and New York-based Sonterra Capital Master Fund and traces back to the 2013 scandal in Singapore when the central bank found more than 100 traders in the city-state tried to rig key borrowing and currency rates.”

There seems to be a pattern of litigation here. So in these times of hard-to-find profits and yield (and fat fees), is this a new hedge fund investment strategy?

Peter Fray

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