“The only plausible explanation is that Defendants coordinated artificially to influence the results of the auctions in the primary market,” according to the complaint filed by the Cleveland Bakers and Teamsters Pension Fund and other investors.
Wall Street Banks Manipulated LIBOR In Rigging Us Treasury Auctions (#GotBitcoin?)
The antitrust probe was focused on whether Goldman Sachs traders colluded with others to fix prices in the $13 trillion Treasurys market. Wall Street Banks Manipulated LIBOR In Rigging Us Treasury Auctions (#GotBitcoin?)
The probe, which exposed weaknesses in the way the US Treasury prices the interest on the country’s debt obligations, has been an embarrassing one for Washington since it was first exposed in June 2015.
Investigators are hitting dry wells in their evidence hunt through thousands of pages of Bloomberg chats, plus dozens of interviews, to bring a clear case, one law enforcement official familiar with the probe told The Post.
“There just wasn’t enough there,” the person said.
The probe, which exposed potential weaknesses in the way the US Treasury prices the interest on the country’s debt obligations, has been an embarrassing one for Washington since it was first exposed by The Post in June 2015.
Jacob Lew, then head of the Treasury under President Barack Obama, wanted a quick resolution to the probe soon after it was revealed, The Post reported in 2017
Since then, Lew was replaced by Goldman alumnus Steve Mnuchin, who is now Treasury secretary under President Trump. Another ex-Goldman partner who joined the White House, Gary Cohn, had overseen the division that submitted the bids to Treasury at the time.
No one has accused Lew, Mnuchin or Cohn of any wrongdoing in the matter.
While charges are unlikely to be filed, it’s not clear that banks won’t suffer some negative consequences.
A class-action lawsuit filed in 2015 showed that, after The Post first broke the story, banks changed their behavior in how they bid for Treasury bonds.
The suit, which was brought on behalf of pension funds and investors, also relied on a confidential informant who helped describe how the banks allegedly rigged the Treasury markets.
As recently as 2017, Department of Justice investigators were focused on a period from 2007 to 2011 when Goldman was particularly successful in bidding for Treasury bonds, sources told The Post in 2017.
Since then, however, a string of departures at the department also slowed the investigation, a third source told The Post.
The talks between Goldman and the feds have been “inactive,” another person familiar with the talks told The Post.
The investigation was one of many that looked into banks for potential conspiracies to rig markets in the wake of blockbuster interest-rate and currency-rigging probes that led to billions of dollars in fines and the resignation of top execs, including Barclays chief executive Robert Diamond.
Other banks, including Deutsche Bank, Royal Bank of Scotland, BNP Paribas, Morgan Stanley, and UBS, had trading and chat records subpoenaed by the Department of Justice.
In addition, the Securities and Exchange Commission and the New York Department of Financial Services were investigating the alleged rigging.
Spokespeople for the Department of Justice and the SEC didn’t return requests for comment, and a DFS spokesman declined to comment.
Wall St. Traders Secretly Used Chat Rooms To Rig Treasury Bond Prices:
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, Morgan Stanley, the Royal Bank of Scotland, BNP Paribas, and UBS, 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.
Washington’s probe into the alleged rigging of the $13 trillion US Treasurys market by Wall Street banks has narrowed its focus to a handful of firms — including Goldman Sachs.
In addition, European authorities have opened their own investigation into possible Treasurys bid-rigging, sources said.
Investigators in the fraud division of the Justice Department have obtained chats and emails from Goldman that appear to implicate the company in manipulating the price of Treasury bonds, according to two sources familiar with the investigation.
Those chats and emails are being analyzed to determine if traders at other banks could be involved with any possible bid-rigging of US government debt, those two people said.
The identities of any traders in investigators’ cross hairs couldn’t be learned.
Goldman is said to be cooperating with the probe, one person said.
In June, The Post reported exclusively that Justice was in the early stages of investigating banks for rigging the price of Treasurys, the largest and most easily tradeable asset in the world.
Goldman is one of about 22 financial institutions that have been probed for any evidence that they may have manipulated Treasury auctions — a secretive process where banks and other financial services companies bid on the price of government debt, sources said.
Justice is also looking into whether there was price-rigging in the secondary market for Treasurys, where debt is sold at a premium, sources added. It’s unclear if investigators have yet found any improprieties or criminality.
Goldman, run by Chief Executive Lloyd Blankfein, is a major player in US government bond trading, and regularly submits bids for auctions.
In November, Goldman disclosed in a regulatory document that it was being probed for possible manipulation of government bond prices. Michael DuVally, a Goldman spokesman, declined to comment further.
Meanwhile, the European Commission, the law enforcement arm of the European Union, has opened its own investigation, joining Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the New York Department of Financial Services, according to two sources.
The rigging investigation is the biggest scandal to hit the quiet but crucial Treasurys market since 1990 when Paul Mozer, a former Salomon Brothers partner, illegally cornered the government debt market. Mozer’s actions are known to readers of Michael Lewis’ “Liar’s Poker.”
Traders are thought to have rigged the market in two possible ways: by agreeing beforehand to keep bond prices higher than normal in order to boost profits in other positions that depend on higher rates, similar to how banks rigged the London-based Libor rate.
Banks also could have colluded to keep prices lower than normal to sell them at a higher price — and score a bigger spread — to their clients, who agreed to pay a fixed amount beforehand.
- 69% Of Reissued Treasury Auctions Were Suspicious, Suit Says
Same Type Of Analysis Caught Cheating In Currencies And Libor
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A Justice Department spokesman didn’t return an email seeking comment, while EC spokesman Ricardo Cardoso declined to comment.
Each bank declined to comment on the lawsuit after it was first filed.
Regulators Ask Banks About Preparations for Libor’s Demise
Banks must show how they are managing risks stemming from the planned end of the benchmark rate next year.
Financial regulators are asking banks to show they have plans in place to manage the risks stemming from the planned demise of a key benchmark interest rate.
Regulators, which for months have urged banks and other financial services firms to prepare for the likely end of the London interbank offered rate in 2021, have recently begun asking for evidence of their preparations.
The New York State Department of Financial Services is requiring banks and insurers to submit plans for managing the risks associated with the end of Libor, the agency said in a letter last week. The Office of the Comptroller of the Currency, which oversees national banks, said in December that it plans to increase oversight of the issue and that examiners will evaluate whether banks have made an inventory of all contracts that could be affected.
The Federal Reserve’s supervisors have also begun asking banks about their plans, Vice Chairman for Supervision Randal Quarles said in June. The Federal Deposit Insurance Corp. declined to comment.
“They are all making similar noises: ‘We need you to pay attention. It is important. It isn’t going to go away,’ ” said Paul Forrester, a partner at law firm Mayer Brown LLP who focuses on corporate finance and securities.
Global banks face a particularly thorny challenge in moving away from Libor because they need to take into consideration the range of alternative rates that could be used in currencies across the world, Mr. Forrester said.
Major banks have made progress in preparing for the transition, according to Dan Stipano, former deputy chief counsel at the OCC. However, the coming transition to an alternative rate is rife with legal and operational risks for the industry, lawyers said.
“They need to give themselves a lot of lead time,” said Mr. Stipano, who is now a partner at Buckley LLP.
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