Band of America Forex Settlement
LAW 360: By Kurt Orzeck
Law360, Los Angeles (April 29, 2015, 8:27 PM ET) — Bank of America Corp. will pay $180 million to settle claims in an antitrust class action alleging it was part of a conspiracy to rig the approximately $5 trillion-per-day foreign exchange market, according to a Wednesday securities filing.
The Charlotte, North Carolina-based bank said in a 10-Q form that it would use its existing reserves to cover the cost of settling the suit and that the deal is subject to court approval. Bank of America announced the settlement on Apr. 16 but didn’t disclose the amount until Wednesday.
Bank of America became the third global bank to reach a settlement in an antitrust class action following a $99.5 million deal with JPMorgan Chase & Co. in January and UBS AG’s March settlement for $135 million. The other banks in the case, including Citigroup Inc., Barclays PLC, Goldman Sachs Group Inc., Morgan Stanley and Deutsche Bank AG, have faced the daunting prospect of fighting the case out after U.S. District Judge Lorna G. Schofield denied their motion to dismiss in January.
Bank of America’s attorneys said earlier this month that it had agreed to cooperate in the plaintiffs’ continuing investigation and litigation against nine remaining banks in federal district court in New York.
“This latest settlement sends a message to Wall Street banks that their long-standing practice of putting their own interests ahead of their customers in the foreign exchange market must end,” said David R. Scott, managing partner of Scott & Scott LLP, one of the lead plaintiffs firms in the case.
Other plaintiffs’ attorneys declined comment on Wednesday.
Judge Schofield rejected the banks’ claims that the U.S. plaintiffs failed to bring enough evidence of a potential conspiracy, finding that the facts laid out in the complaint, including the existence of chat rooms where traders “congratulated each other on the manipulation of ‘the Fix,'” were enough that discovery and trial were needed to determine their veracity. “The Fix” is an industry term for the median price of a widely traded currency 30 seconds before market close that sets the closing price for the day.
“Even the names the FX traders gave their chat rooms – such as ‘The Cartel,’ ‘The Bandits’ Club’ and ‘The Mafia’ – support the inference that the chat rooms were used for anti-competitive purposes,” Schofield wrote.
Citi and Barclays are rumored to be in settlement talks as well, and Bank of America’s settlement may provide more ammunition for the plaintiffs in their talks.
“The agreement ensures crucial cooperation that will assist victims in obtaining additional monetary relief from other financial institutions that took advantage of their clients,” said Scott & Scott partner Christopher M. Burke, the lead counsel for the plaintiffs
The plaintiffs, including the Louisiana Municipal Police Employees’ Retirement System, filed their complaint alleging rigging of the $5.4 trillion-per-day foreign exchange market in 2012. They alleged the banks routinely charged pension funds the worst possible forex rates when processing transactions on their behalf.
Other plaintiffs filed similar class action complaints. They were eventually consolidated in New York district court.
Buttressing the plaintiffs’ claims were a series of enforcement actions from U.S. and other regulators resulting in about $4.3 billion in fines against the banks.
Discovery in the class action has been stayed for six months as the U.S. Department of Justice continues its investigation into forex rigging.
The plaintiffs are represented by David R. Scott, Chris M. Burke, Kristen Anderson, Sylvia M. Sokol, Walter Noss, William Fredericks, Thomas Boardman and Donald A. Broggi of Scott & Scott LLP and Michael D. Hausfeld, William Butterfield, Reena Gambhir, Timothy Kearns, and Nathaniel Giddings of Hausfeld LLP.
Bank of America is represented by Adam S. Hakki, Richard F. Schwed and Jeffrey J. Resetarits of Shearman & Sterling LLP.
The case is In re: Foreign Exchange Benchmark Rates Antitrust Litigation, case number 1:13-cv-07789, in the U.S. District Court for the Southern District of New York.
–Additional reporting by Evan Weinberger. Editing by Emily Kokoll.