Bank of America and Deutsche Bank have reached an agreement to pay an aggregated $65.5 million to reach a settlement with investors regarding an alleged scheme to manipulate the sovereign, supranational and agency (SSA) bond market.
Bank of America and Deutsche Bank will pay $17 million and $48.5 million, respectively, to settle allegations that the banks took part in a scheme to tamper with prices of SSA bonds, along with several other notable North American and European financial firms.
The settlement proposal agreement mandates that the banks cooperate with the claimant class, including providing online chats shared between the purported conspirators.
The co-lead counsel for the claimants estimates that thousands of contributors to U.S. pensions, investment funds, endowments and similar institutions, will eventually join the settlement class and that the banks’ cooperation will be helpful in future litigation against remaining defendants.
The proposed settlement also requests that the court identify plaintiffs Sheet Metal Workers Plan of Northern California, KBC Asset Management NV, and Iron Workers Pension Plan of Western Pennsylvania as class representatives.
Investors initiated a legal action against the banks regarding the SSA bonds in 2016, following a report that the financial institutions were being investigated by U.S. and U.K. officials for violations of anti-competition regulations for questionable SSA transactions. Nine of those actions were consolidated in August 2016, and an additional five have subsequently been added in the interim.
Bank of America was the first to establish a settlement, agreeing to pay $17 million and providing opposing counsel with a significant amount of relevant evidence that reflected collusion between the defendants. Shortly after that, Deutsche Bank initiated settlement efforts as well.
Governments and financial institutions like the World Bank distribute SSA bonds to finance essential government functions. The plaintiffs claimed traders employed by the banks circulated confidential customer information including identities, trading behavior, and order sizes that enabled them to coordinate bid-ask spreads extended to their clients. This practice, according to the plaintiffs, reduced market competition.
The proposed class action alleges that thousands of U.S. investors purchased and sold billions of dollars in SSA bonds through the defendant banks. It also claims that the banks breached the Sherman Antitrust Act and included an unjust enrichment claim.
The remaining defendant banks that opted not to settle have filed motions to dismiss. However, the plaintiffs have requested permission from U.S. District Judge Edgardo Ramos to submit an amended consolidated complaint. A pre motion conference is scheduled for August 25.
