DCredit Suisse Group AG has won a class action lawsuit alleging price fixing in the foreign exchange market. This has paid off the Swiss bank’s decision to fight the lawsuit in court and refuse to settle. Up to 19 billion dollars in damages were threatened.
The jury in New York on Thursday returned a verdict in favor of Credit Suisse. The latter had denied having set the bid-ask spreads for foreign exchange transactions with other banks and thus benefited at the expense of customers. If the appeal is unsuccessful, the largest case against Credit Suisse in relation to its forex trading would be closed.
Credit Suisse is the only one of the 16 banks named in the original lawsuit that has been fighting back for years. The others, including Deutsche Bank AG, UBS Group AG, BNP Paribas SA, Citigroup Inc., Barclays Plc, JPMorgan Chase & Co., and HSBC Holdings Plc, paid a total of $2.3 billion for the settlement, one of the largest settlements in the US History of antitrust law.
Process success at the right time
Pension funds and other FX clients had sued as a group, alleging that traders regularly used online chat rooms to coordinate prices from late 2007 through 2013. “Credit Suisse is extremely pleased that the jury agreed with us that the lawsuit was unfounded,” the bank said. Attorneys for the plaintiffs initially declined to comment.
Against the background of the presentation of a possibly far-reaching realignment of the traditional Swiss bank, which is due next week, the success of the lawsuit is not inconvenient. On Monday, the institute closed another legacy case by paying $495 million. It was about mortgage-backed bonds, the securities that were at the heart of the 2008 financial crisis. “This is obviously a great result for Credit Suisse at a difficult time for the bank,” said Elliott Stein, a senior litigation analyst at Bloomberg Intelligence. In July, Credit Suisse reached an agreement with nearly 1,300 securities companies and government agencies that had withdrawn from the class action lawsuit. The terms of the settlement were not disclosed.
According to calculations by Bloomberg Intelligence, Credit Suisse was threatened with liability of $19 billion because of the possibility of triple damages in the case of price fixing. However, US District Judge Lorna Schofield limited the case to two questions: Was there a conspiracy to set the price ranges, and if so, did Credit Suisse knowingly participate?
“Don’t be influenced by language”
The jury agreed the conspiracy existed but found the plaintiffs could not prove Credit Suisse’s involvement. At the heart of the process, which began ten days ago, were more than 2,500 online chats between traders, in which they exchanged news, gossip and salacious jokes in addition to information on trading margins. Credit Suisse witnesses testified that the chat rooms were useful for exchanging market information. During the period in question, foreign exchange trading reached a volume of up to $5.3 trillion a day.
The jury studied transcripts from chat rooms with names like “The Cartel,” “The Bandits’ Club,” and “The Mafia.” Credit Suisse dismissed problematic statements in the chats as boasting or a joke. The judge warned the jury not to be swayed by the “figurative, crude, insensitive and demeaning language” in the chats.
According to calculations by Bloomberg Intelligence, the judge’s pre-trial decisions had already reduced the litigation risk for Credit Suisse to around $200 million. Credit Suisse experts told jurors the forex market is too big to be manipulated by a small number of traders in online chat rooms. Above all, the bank wanted to gain market share, which is why price agreements would have been nonsensical. On the contrary, their dealers tried to undercut the competition in terms of price, said bank witnesses.
