Last month, a federal judge in New York granted preliminary approval of
a $22 million settlement agreement filed last month between JPMorgan Chase
& Co. and a class of investors. The investors alleged that JPMorgan,
and other banks, rigged the market for derivatives linked to the Swiss
franc London Interbank Offered Rate. According to the complaint, the banks’
practices caused the plaintiffs to engage in derivatives transactions
based on the benchmark rate at artificial prices, resulting in considerable
financial losses. The plaintiffs believe that the settlement will bolster
their litigation efforts against other similarly situated defendants.
Pending final approval, the settlement will involve JPMorgan providing
a $22 million lump sum to be allocated amongst class members. They must
also provide its disclosures to government officials, and make further
financial information available for the plaintiffs to utilize against
the remaining defendants - consisting primarily of European banks. The
class includes U.S. investors who conducted transactions in Swiss franc
derivatives over an 11-year term.
The settlement was preapproved while Judge Stein was simultaneously considering
motions to dismiss submitted by the remaining defendants. UBS AG, Deutsche
Bank AG, and other financial institutions claimed that the court lacked
the requisite jurisdiction, saying the case should be heard in Europe.
Plaintiff’s counsel responded that the complaint is based on well-established
U.S. Supreme Court precedent, namely, that the defendants purposely elected
to enter the U.S. market where they subsequently participated in the fraudulent activity.
The judge clarified in his preliminary approval order that while the class
had been established, a distribution plan for the $22 million has yet
to be proposed.
The suit, which additionally implicates European-based hedge fund BlueCrest
Capital Management LLP, alleges that the banks operated a syndicate to
manipulate the spread between prices they offered to purchase and sell
Swiss franc Libor-based derivatives. UBS, RBS, JPMorgan, Credit Suisse
and Deutsche Bank, all of which hold seats on the British Bankers Association
Swiss franc Libor panel, also profited by collaborating in their efforts
to fix the Swiss franc Libor, which was used to value, benchmark, and
settle the same derivatives.
The case is Sonterra Capital Master Fund Ltd. V. Credit Suisse Group AG
et al., case number 1:15-cv-00871, in the U.S. District for the Southern
District of New York.