Nationwide Class Action Lawsuit Accuses Banks of Conspiring to Manipulate Treasury Auctions

By on July 24, 2015

A class action lawsuit was filed in federal court on behalf of investors who purchased U.S. Treasury securities from 2007 to 2012 against 22 financial firms that functioned as primary dealers in the Treasuries market.  Primary dealer banks are Treasury auction power players that are authorized to transact directly with the Federal Reserve and serve as market makers in the secondary market.

The 22 named defendants including Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, UBS and the Merrill Lynch unit of Bank of America were accused of violating antitrust laws by inflating prices of Treasuries that they sold to investors in the pre-auction “when issued” market, and then deflating prices for Treasuries that they purchased to cover their pre-auction sales positions.

Plaintiffs asserted that “expert economists” identified wide gaps between when-issued and auction prices around December 2012, and that that these gaps narrowed significantly as regulators initiated probes alleging manipulation of the London interbank offered rate (LIBOR), a global interest rate benchmark.

In June, media reports indicated that the Department of Justice was investigating possible Treasury auction manipulation.

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