The New York Post: Lawsuit alleges Goldman, other big banks shared client info to rig US Treasurys auctions
Wall Street banks secretly shared client information in online chat rooms in order to rig auctions for the $ 14 trillion US Treasurys market, according to an explosive lawsuit filed in Manhattan federal court on Wednesday.
The move wrongly fattened the banks’ profits and picked profits from clients, the suit claims.
The new accusations, leveled by several pension funds and wealthy individual investors, are contained in an expanded class-action suit originally filed in July 2015 — and include an unusual twist: Some of the evidence came from confidential informants and one of the banks sued in the earlier action.
That bank is now cooperating with the plaintiffs in the massive civil action, and is providing an in-depth look into how Wall Street allegedly conspired to rig Treasury bond trades.
The revised lawsuit expands on details on how the banks conspired to set Treasury bond prices — like moves to manipulate the price of the bonds higher on days when there was a lot of demand, and vice versa, court papers claim.
The banks worked their scam for years until The Post first reported in June 2015 of the existence of a government investigation into the alleged actions, the updated lawsuit claims.
The funds, representing retirees and public workers, also claim the banks conspired to rig the secondary Treasury markets beginning in the 1990s through tightly controlled electronic platforms that inhibited more competitive trading — a new allegation that wasn’t in the original suit but mirrors similar complaints filed against banks in other markets, like stock loans.
The amended suit tightens its focus on a select number of banks, naming Goldman Sachs GS, +0.16% , Deutsche Bank DB, +1.59% DBK, +1.22% , Morgan Stanley MS, -0.58% , the Royal Bank of Scotland RBS, +0.14% , RBS, +0.00% BNP Paribas BNP, +0.60% , and UBS UBS, -0.18% , UBSG, -0.41% among others, as the firms behind the rigging, which they allege occurred from Jan. 1, 2007 to mid-2015.
Last year, the judge presiding over the class-action suit had questioned whether the claims were strong enough to proceed.
The funds continue to allege the banks mined their own customers’ bids for Treasury bonds to get a bigger share of the auction, and sell the bonds for more profit.
Probes on the auction practices are being conducted by the Justice Department, the Securities and Exchange Commission and other federal, state and overseas regulators, sources said. No regulator has accused any bank of wrongdoing.
The banks named in the suit are primary dealers, which means they buy the debt directly from the Treasury and resell it to their clients at a pre-determined price.
Typically, the Treasury holds an auction, then banks submit their bids for US debt based on how much they think those bonds are worth. The Treasury then doles out the bonds proportionately to the bidders at the same price. The bank that asked for the best price gets the most bonds.
Traders at the Wall Street banks shared the prices that their clients had sought to buy the bonds, giving each of the banks in the alleged cartel a clearer picture of what they thought the market was, and a better chance at getting a bigger share of the bonds to sell, according to the complaint.
Details about bid prices are supposed to be a closely held secret.
Each bank declined to comment on the lawsuit after it was first filed.
This report originally appeared on NYPost.com