Lawsuit Regarding the London Gold Fixing

122
Wed, Mar 5, 2014 - 11:54pm

A class action lawsuit was filed on March 4, 2104 in the US District Court, Southern District of New York, Manhattan. The caption is Maher v. Bank of Nova Scotia, 14-cv-01459, U.S. District Court, Southern District of New York (Manhattan).

The articles can be found on a google search, see here, for example.

https://www.bloomberg.com/news/2014-03-04/barclays-deutsche-bank-accused...

I went to the pacer site and pulled the complaint. I breezed through it quickly.

At this point, I am pretty far from impressed. In fact, I am much closer to WTF?

The lawsuit has a single class rep who bought some futures on the Comex. The legal theory is straight antitrust, based primarily on the claim that the LBMA's twice a day price fix is somehow a violation of the Sherman Antitrust Act and the Clayton Act ("contract, combination or conspiracy on restraint of trade"). The sole facts plead consist of empirical evidence of price moves, hardly persuasive, along with a recounting of the manner in which the five bankers set the fix. Again, this is hardly going to keep this case in Federal Court and I expect a timely 12(b)(6) motion will be filed and granted.

Where is the link between the fix and the price smashes we all see all the time? Sure the charts paint some statistically improbable moves, but where is the proof linking the LBMA to all of this. Where are the witness' allegations confirming that the price fix was set at a point to restrain trade, or that information was leaked in advance, or set at specific price points to front run the market? Just because we see manipulation on a chart does not automatically link that manipulation to the acts of the largest bankers choosing a price twice a day. Remember, buyers and sellers can buy or sell at whatever price they want. It's not like they all got together and restricted supply to increase the price or flooded the market with supply to crush the price. You know, like the bullion banks do all the time by selling naked shorts . . .

Anyhow, using the rationale from the complaint, then under this theory, then maybe I can sue Chevron for antitrust gasoline price manipulation at the pump because two owners of local gas stations have coffee at Starbuck's every day then right after that they set the price of gas at their pumps? See how silly this seems?

Sorry to disappoint, but I was hoping for more.

If anyone has questions, I can go into some more detail in the comments tonight and tomorrow.

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  122 Comments

AlienEyes
Mar 6, 2014 - 12:01am

ACE !

#1

Keep Stackin' !

Mar 6, 2014 - 12:09am
boomer sooner
Mar 6, 2014 - 12:10am

Thanks CL

Thanks CL

imfd
Mar 6, 2014 - 12:19am

Is this a frivolous lawsuit ?

Could this lawsuit detract from future lawsuits that might be constructed upon firmer ground ?, it seems odd that someone who may have the wherewithal to file a case like this, might also be lacking enough knowledge to make sure that the case has merit. Big talk from me, I know the law is a serpentine beast and I also know I know nothing.

AlienEyes
Mar 6, 2014 - 12:20am

Trying to sue banksters at

Trying to sue banksters at this point reminds me of a Bob Dylan song, "Blowin' in the Wind".

Ah, make that "Pissin' in the Wind" instead.

Mudsharkbytes
Mar 6, 2014 - 12:24am

I'd say

sixth, but this top ten stuff is gettin' old.

Mar 6, 2014 - 1:00am

Imfd - No

I would not say the lawsuit is frivolous, which to a lawyer means totally lacking in legal merit that could result in a claim of malicious prosecution against the lawyer for filing the lawsuit. In such case, the standard to prove lack of merit means that no reasonable lawyer would have filed the case.

The concept of the lawsuit is perfectly acceptable, but the execution is not well taken at all.

Some time back I had a good conversation with another blogger here that part of any lawsuit claiming manipulation is the requirement that a person must show damages. That, the person must show legal harm.

How can a person who buys a quantity of physical gold/silver say that he or she was harmed? This person can claim that price was manipulated. Ok, fine. But where is the harm? The person either paid too much or too little, but the transaction occurred at arms length on the open market. The fact that both buyer and seller referenced an arbitrary price, set by stodgy banksters in a smoke-filled, wood paneled old room, then exchanged fiat for metal, to this I say yawn. So what? The one who paid too much says manipulation, while the other says it was a great deal.

Neither had to reference the spot price, right? They could have referenced something else and ignored spot price, couldn't they? The fact that there is a spot price implies that others may be willing to trade at that price, thus providing some evidence of reasonableness to the terms of the deal, giving both participants to the deal some assurances that price terms are in the ball park.

Secondly, let's say I bought silver at $45 (which I did by the way, doh!), and now I choose to sell some at $21.50. Did price manipulation cause my loss (the difference between $45/oz. vs. $21.50/oz.)? Or, did something else? Why did I have to sell? Does that mean that I can sue Maytag for making me sell my silver to buy a new fridge, and claim that Maytag caused me to lose $19.50/oz.

Similarly, if silver were trading at $45/oz. right now, could I not sue JPM for them making me not buy silver when it was at $20/oz., claiming that their price suppression scheme scared me into not buying the dip?

See how difficult this becomes without proof of actual insider knowledge?

If the CFTC were a real player, then position limits would be enforced, there would be no naked shorting, there would be mandatory delivery, there would be no closed loop and certainly no fractional games between allocated vs. non-allocated, and there would be on line, transparent identification of the holders of every single position. If someone tried to make a move, the market would react, and perhaps act like a real market.

But, until that happens, then it is not wise to argue a legal cause and effect relationship between prices on a chart and some activity between players, no matter how much we wish it to be exposed and eliminated.

Hammer
Mar 6, 2014 - 1:32am

Excellent analysis. I had

Excellent analysis. I had mentioned this case earlier and posted I reckoned they didn't have a "snowball's chance in hell."

Carry on.

Mar 6, 2014 - 2:28am

Wannabe wizeguy frontrunning a REAL lawsuit?

This guy knows (or at least believes) that the Fix is indeed manipulative. See recent literature claiming to prove this. Our plaintiff is basically buying a call on the event that either regulatory action or a suit with much more substantive evidence proves his claim, and he gets to either settle or be awarded favorable judgment on that basis? As long as lawsuit is not frivolous, he has relatively lost little -- assuming he is not concerned about antagonizing LBMA.

Louie
Mar 6, 2014 - 2:41am

Discovery?

CA Any chance that the lawyers filed the suit hoping to get the opportunity to put some bankers under oath and compel them to give testimony? Louie's other though is this might just be another MOPE trying to get people to jump into gold. You know "Gold is manipulated down so buy now before it explodes. "

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