New Class Action Suit Over Swaps Trading Hits Wall Street – by Reuters , NOVEMBER 26, 2015, 5:33 AM EST


Pension funds allege that a cartel of big banks made it artificially expensive to hedge against interest-rate risk.

Wall Street’s biggest and best are facing new accusations of market-rigging in a multi-billion class action suit from investors in the $320 trillion market for interest rate swaps.

The suit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged.

Filed in the U.S. District Court in Manhattan, the suit accuses Goldman Sachs Group GS 0.25% , Bank of America Merrill Lynch BAC -0.17% , JPMorgan Chase JPM0.12% , Citigroup Inc. C -0.18% , Credit Suisse Group CS 2.55% , Barclays Plc BCS0.45% , BNP Paribas SA BNPQY -0.44% , UBS UBS 0.16% , Deutsche Bank AG DB0.24% and the Royal Bank of Scotland Plc RBS of colluding to prevent the trading of interest rate swaps on electronic exchanges, similar to those on which stocks are traded.

Goldman Sachs, Citigroup, Bank of America, BNP Paribas, Credit Suisse and Royal Bank of Scotland declined to comment. JP Morgan, Barclays, Deutsche Bank and UBS were not immediately available.

The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, & Sullivan LLP, which has taken the lead in a string of antitrust suits against banks.

As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps.

The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.”

 

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http://fortune.com/2015/11/26/swaps-class-action-suit-wall-street/

 

Criminal Inquiry Said to Be Opened on Citigroup – By BEN PROTESS and MICHAEL CORKERY APRIL 2, 2014, 11:03 PM


Edgad Garrido/ReutersCitigroup disclosed in February that its Mexican unit, Banamex, uncovered an apparent fraud involving an oil company client in Mexico.Citigroup disclosed in February that its Mexican unit, Banamex, uncovered an apparent fraud involving an oil company client in Mexico.

Citigroup disclosed in February that its Mexican unit, Banamex, uncovered an apparent fraud involving an oil company client in Mexico.

Just as Citigroup was putting a troubled past of taxpayer bailouts and risky investments behind it, the bank now finds itself in the government’s cross hairs again.

Federal authorities have opened a criminal investigation into a recent $400 million fraud involving Citigroup’s Mexican unit, according to people briefed on the matter, one of a handful of government inquiries looming over the giant bank.

The investigation, overseen by the F.B.I. and prosecutors from the United States attorney’s office in Manhattan, is focusing in part on whether holes in the bank’s internal controls contributed to the fraud in Mexico. The question for investigators is whether Citigroup — as other banks have been accused of doing in the context of money laundering — ignored warning signs.

The bank, which also faces a parallel civil investigation from the Securities and Exchange Commission’s enforcement unit, hired the law firm Shearman & Sterling to lead an internal inquiry into the fraud, said the people briefed on the matter, who spoke only on the condition of anonymity. At a meeting last month, the bank’s lawyers presented their initial findings to the government.

The bloom of activity stems from Citigroup’s disclosure in February that its Mexican unit, Banamex, uncovered an apparent fraud involving an oil services company.

The disclosure — that at least one Banamex employee processed falsified documents that helped the oil services company obtain a loan that cannot be repaid — generated immediate interest from federal authorities. But the decision by the F.B.I. and prosecutors to open a formal investigation, a move that has not been previously reported, has now officially drawn a faraway crime to Citigroup’s doorstep.

The case represents another setback for the bank, which has also come under fire from regulators in Washington. Last week, the Federal Reserve rejected Citigroup’s plan to increase its dividend. The rebuke embarrassed the bank and raised questions about the reliability of its financial projections.

The scrutiny coincides with Citigroup’s recent announcement that it faces a separate, and perhaps more threatening, investigation from federal prosecutors in Massachusetts. The prosecutors, who have sent subpoenas to Citigroup, are examining whether the bank lacked proper safeguards against clients laundering money. Citigroup, the people briefed on the matter said, has hired the law firm Paul, Weiss, Rifkind, Wharton & Garrison to handle that case, which stems from the prosecutors’ suspicion that drug money was flowing through an account at the bank.

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