Wall Street banks secretly shared client information in online chat rooms in order to rig auctions for the $14 trillion US Treasury’s market.
A lawsuit seen by the New York Post and filed in Manhattan federal court this week details how the banks were able to make vast profits as they benefited from their clients own portfolios.
The accusations have been leveled at several pension funds and a number of individual wealthy investors., however some of the evidence came from an earlier class action lawsuit filed in July 2015.
The suit alleges that some of the biggest banks on Wall Street allegedly got together with one another to rig Treasury bond trades.
The banks among others include Goldman Sachs, Morgan Stanley, the Royal Bank of Scotland, BNP Paribas, and UBS. Each bank has declined to comment on the lawsuit after it was first filed.
It’s alleged the banks would manipulate the price of the bonds to make them higher on days when there was a lot of demand and reduce the cost when there was less interest.
Usually the banks would buy debt directly from the Treasury which would then resell onto their clients at a pre-determined price.
They would hold an auction to which the banks would submit their bids for US debt based on how much they believe the bonds to be worth.
The bank that asked for the best price would receive the most bonds.
However, it’s alleged as part of this scheme, the traders at the banks would share the prices at which their clients wanted to buy the bonds.
It would then give the entire group a far clearer picture of the value of the overall market.
Bidding prices are supposed to be a closely guarded secret.
The banks allegedly continued with the scam for years, from January 2007 until a government investigation was launched into the actions in June 2015.
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.
The funds allege banks would mine their own customers’ bids for Treasury bonds to get a bigger share of the auction, and sell the bonds for more profit.
The Justice Department, the Securities and Exchange Commission and a number of other federal, state and overseas regulators are now looking into the alleged wrongdoing.
Written for and published by the Daily Mail ~ November 16, 2017.
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