As reported by Reuters, 16 major banks (mainly US-based) are being sued by institutional investors and others for rigging the fiat FX market. Blackrock and Allianz are some of the institutional investors taking the banks to court. The banks being sued include – Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Japan’s MUFG Bank, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered, and UBS. The case is titled ‘Allianz Global Investors GMBH et al. v Bank of America Corp et al., U.S. District Court, Southern District of New York, No. 18-10364.’
Banks rigging the FX Market
The case has not yet hit mainstream attention regarding its implications. The last time a scandal of this nature was revealed was LIBOR, where banks were found to have manipulated the London Interbank Offered Rate. This is essentially the rate that the world’s financial markets relies on for loans, later proven to be rigged in court. Should this happen again, it will generate even more negative press for the manipulated fiat financial markets, given how large the FX market is.
The case was filed in New York, and the plaintiffs are accusing the defendants of rigging the market from 2003-2013. The defendants are accused of rigging vital currency benchmarks such as WM/Reuters Closing Rates for their benefit. Chat conversations include “The Cartel,” “The Mafia” and “The Bandits’ Club.” Tactics to carry out the operations include “front-running,” “banging the close,” “painting the screen” and “taking out the filth.” These are the conversations carried out among traders and high-level financial officials at the worlds most reputable banks. According to the complaint –
“By colluding to manipulate FX prices, benchmarks, and bid/ask spreads, defendants restrained trade, decreased competition, and artificially increased prices, thereby injuring plaintiffs.”
Institutional investors for the people?
It is not just Blackrock and Allianz that are taking the case. The California State Teachers’ Retirement System (CalSTRS) and the central bank of Norway (Norges) are also named as plaintiffs. It might be surprising to many that it is institutional investors and other entities who are taking the banks to court. All too often, the crypto argument is framed as individuals v corporations and government, which is grossly simplistic. There are likely shades of grey even within corporate and government realms. While cryptocurrency is first and foremost a decentralized and grassroots movement, powerful and influential entities are going to be necessary to tackle large banks in courts.
The FX market is currently estimated at USD 5 Trillion in transactions every single day. When the figures are tallied for cryptocurrency against fiat, the argument that cryptocurrency is a tool for criminality is very, very thin. Danske Bank was recently found to have laundered over USD 220 Billion, more than the entire cryptocurrency market capitalization and the biggest scandal in European banking history. There are many of these types of incidents, and it is being legally demonstrated that the entire fiat banking structure is permeated with money laundering and market manipulation activity.
Digital Nomad with an interest in Zen and Blockchain technology.
Law graduate with 3 years experience as a consultant in the capital markets industry and 4 years experience freelancing on UpWork as a Creative Writer.