Last month, a federal judge in New York granted preliminary approval of a $22 million settlement agreement filed last month between JPMorgan Chase & Co. and a class of investors. The investors alleged that JPMorgan, and other banks, rigged the market for derivatives linked to the Swiss franc London Interbank Offered Rate. According to the complaint, the banks’ practices caused the plaintiffs to engage in derivatives transactions based on the benchmark rate at artificial prices, resulting in considerable financial losses. The plaintiffs believe that the settlement will bolster their litigation efforts against other similarly situated defendants.
Pending final approval, the settlement will involve JPMorgan providing a $22 million lump sum to be allocated amongst class members. They must also provide its disclosures to government officials, and make further financial information available for the plaintiffs to utilize against the remaining defendants – consisting primarily of European banks. The class includes U.S. investors who conducted transactions in Swiss franc derivatives over an 11-year term.
The settlement was preapproved while Judge Stein was simultaneously considering motions to dismiss submitted by the remaining defendants. UBS AG, Deutsche Bank AG, and other financial institutions claimed that the court lacked the requisite jurisdiction, saying the case should be heard in Europe. Plaintiff’s counsel responded that the complaint is based on well-established U.S. Supreme Court precedent, namely, that the defendants purposely elected to enter the U.S. market where they subsequently participated in the fraudulent activity.
The judge clarified in his preliminary approval order that while the class had been established, a distribution plan for the $22 million has yet to be proposed.
The suit, which additionally implicates European-based hedge fund BlueCrest Capital Management LLP, alleges that the banks operated a syndicate to manipulate the spread between prices they offered to purchase and sell Swiss franc Libor-based derivatives. UBS, RBS, JPMorgan, Credit Suisse and Deutsche Bank, all of which hold seats on the British Bankers Association Swiss franc Libor panel, also profited by collaborating in their efforts to fix the Swiss franc Libor, which was used to value, benchmark, and settle the same derivatives.
The case is Sonterra Capital Master Fund Ltd. V. Credit Suisse Group AG et al., case number 1:15-cv-00871, in the U.S. District for the Southern District of New York.