Citi among banks winning dismissal of bond-rigging suit

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Nine of the world's biggest banks won dismissal of a lawsuit accusing them of conspiring to rig bonds issued by government entities and institutions like the World Bank, after a federal judge said the investors who sued didn't show how the alleged collusion led to higher prices for the securities.

Investors in the market for supranational, sub-sovereign and agency debt — often called SSA bonds — sued almost a dozen banks in 2016, alleging they fixed prices that were quoted to clients, steered business to each other and shared confidential information with each other. The market could range from $9 trillion to $15 trillion, according to data compiled by Bloomberg.

U.S. District Judge Edgardo Ramos in New York tossed out the suit against the banks still remaining in the suit — Barclays, Credit Agricole, Citigroup, Credit Suisse, HSBC, Nomura Holdings, Royal Bank of Canada, Toronto-Dominion Bank and BNP Paribas. In a ruling posted Tuesday, Ramos said the investors had failed to show how any specific transaction had harmed them.

The investors "essentially ask this court to infer, based on approximately 150 chats allegedly showing manipulated transactions with unknown counterparties over the course of 11 years, that plaintiffs' individually negotiated transactions with the dealer defendants during that period must have likewise been tainted and injured them," Ramos said. "This, by itself, is insufficient for the court to reasonably draw such an inference."

The claims in the suits resemble those made against banks over alleged manipulation of other markets, including currencies, interest-rate derivatives and precious metals, some of which have led to multibillion-dollar settlements, penalties and criminal prosecutions. Bloomberg has previously reported that the U.S. Justice Department is conducting a criminal probe into whether the SSA market was rigged, and that regulators in the U.K. and Europe were also looking into the matter. At least three banks have disclosed receiving inquires on it from regulators.

SSA bonds are mostly illiquid and trade privately between banks and customers, which gives the financial firms an advantage when pricing them. The bonds have higher ratings due to guarantees they carry, and investors like them because they are perceived as higher-quality assets similar to government debt.

Ramos said the plaintiffs could file a new complaint with more specific allegations to revive the suit. The judge didn't rule on the merits of the case and said only that the investors had failed to file a sufficiently detailed complaint. Bank of America Corp. and Deutsche Bank AG previously agreed to pay a combined total of $65.5 million to settle the claims.

The case is In Re SSA Bonds Antitrust Litigation, 16-cv-3711, U.S. District Court, Southern District of New York (Manhattan).

Bloomberg News