Forex has been the big banks secret gold mine, supporting their other losing operations (like normal banking business, lending, etc.). To a large extent this has been unraveling, and this SIBOR lawsuit is another attack on their risk free profit center (FX). Read the entire lawsuit released by Elite E Services here in full. More than 50 unknown defendants and about 20 known FX banks are named in the case, submitted in the UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. Most notably:
C. The CFTC, FSA, and MAS Found that Defendants Manipulated SIBOR and SOR109. Multiple government investigations conducted by the MAS, CFTC, and the FSArevealed Defendants’ agreement to illegally manipulate SIBOR and SOR.110. MAS’ Findings. MAS uncovered a widespread conspiracy in which 133 ofDefendants’ traders sought to manipulate both SIBOR and SOR.111. As punishment for their manipulative conduct, MAS forced all of the Defendantsto make massive interest-free deposits of between 100 million and 1.2 billion Singapore dollarseach, or 9.6 billion U.S. dollars collectively, preventing the conspiracy from using these funds(and stripping its profit-making potential) for a full year.75
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The common purpose of the enterprise was simple: profiteering. By engaging inthe predicate acts alleged including, but not limited to, transmitting or causing false and artificialSIBOR submissions to be transmitted to Thomson Reuters as Agent for the ABS, and byexchanging SIBOR- and SOR-based derivatives positions and prices, Defendants affected theprices of SIBOR- and SOR-based derivatives, rendering them artificial. This directly resulted inDefendants reaping hundreds of millions (if not billions) of dollars in illicit trading profits ontheir SIBOR- and SOR-based derivatives positions.
Technically, anyone who traded USD/SGD would have been affected by such manipulation – but any trader knows that the FX markets are completely manipulated (specifically, FX markets are manipulated because central banks set the M3 and interest rate).
It seems that the WM/Reuters fines & settlements opened a can of worms for the FX banks, who may be forced to find another, more savvy way of fleecing clients, as referenced in the lawsuit:
Specifically, the CFTC found that:(a) Deutsche Bank engaged in systemic and pervasive misconduct directed atmanipulating these international financial benchmark rates over a six-year period,including manipulating SIBOR.79(b) UBS derivatives traders manipulated the official fixings of LIBORs formultiple currencies, including SIBOR, SOR, Yen LIBOR, Swiss Franc LIBOR,Sterling LIBOR, and Euro LIBOR.80 The CFTC noted thatmisconduct for SIBOR and SOR was “similar” to that found in UBS’manipulation of other interbank offered rates.81(c) RBS derivatives and money market traders manipulated SIBOR and SORfrom May 2010 – August 2011, even as RBS was being investigated for (andconducting its own internal investigation related to) manipulating other interbankoffered rates.82116. As a result of their manipulation of multiple interbank offered rates, DeutscheBank, RBS, and UBS collectively paid nearly $2 billion in fines as part of their settlementagreements with the CFTC.
So here we have it in black and white – FX markets are manipulated.
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