Antitrust Law Daily Approval sought for proposed $21M settlements with Citi, JPMorgan over alleged interest rate manipulation
Friday, November 16, 2018

Approval sought for proposed $21M settlements with Citi, JPMorgan over alleged interest rate manipulation

By E. Darius Sturmer, J.D.

FrontPoint Asian Event Driven Fund, Sonterra Capital Master Fund, Ltd., and Fund Liquidation Holdings LLC have asked the federal district court in New York City to grant preliminary approval to two proposed settlements that would resolve their putative class action antitrust suit against Citibank, N.A., JPMorgan Chase Bank, N.A., and respective parent entities Citigroup Inc. and JPMorgan Chase Bank for allegedly conspiring in violation of Section 1 of the Sherman Act to manipulate the price of two related benchmark interest rates—the Singapore Interbank Offered Rate (SIBOR) and the Singapore Swap Offer Rate (SOR). The proposed agreements would provide a total of $20,979,000 and "other valuable benefits" to a settlement class—namely, Citi and JPMorgan’s cooperation and assistance with the continuing prosecution against the numerous remaining non-settling defendants. In their memorandum in support of preliminary approval of the respective settlements, the plaintiffs note that Citi and JPMorgan each agreed to provide certain cooperation materials to them to aid their prosecution and their development of a plan of allocation (FrontPoint Asian Event Driven Fund, Ltd. v. Citibank, N.A., S.D.N.Y., Case No. 1:16-cv-05263-AKH.).

The plaintiffs contend that preliminary approval of the settlements would "unlock information that [the] representative plaintiffs believe is critical to successfully litigating this case and recovering the damages suffered by representative plaintiffs and the class." Thus, they ask the court to adopt their proposed order preliminarily approving the proposed settlements with Citi and JPMorgan, conditionally certifying a settlement class for the claims against them, appointing class counsel, and appointing an escrow agent.

Alleged conspiracy. SIBOR and SOR are related benchmark interest rates that are meant to reflect the cost of borrowing funds in the Singapore market. Both SIBOR and SOR are administered by the Association of Banks in Singapore ("ABS"), a trade group made up of many of the defendants. Each day, Thomson Reuters, as agent of ABS, calculates the daily SIBOR rate, based on interest rate quotes submitted by a panel of banks, including many of the defendants. SOR, by contrast, is based on the prices of foreign exchange swaps, transactions where parties agree to exchange Singapore dollars for U.S. dollars on a future date. SIBOR and SOR are often used to price various types of derivatives. Changes in the SIBOR and SOR rates can, therefore, be detrimental or beneficial to those engaged in derivative transactions.

FrontPoint and Sonterra alleged in their second amended complaint that, between 2007 and 2011, the defendants conspired to manipulate SIBOR and SOR, or to submit to the panel rate quotes not reflecting the true cost of borrowing, with the purpose of profiting from that manipulation. Specifically, the plaintiffs alleged that the defendants submitted artificially high or low SIBOR and SOR rates so that the derivative positions of their traders would be benefited. FrontPoint and Sonterra alleged that they traded some of these derivatives during the period when the defendants distorted the rates. While FrontPoint alleged that it engaged in at least 24 swap transactions directly with two of the defendants, Sonterra did not trade directly with any of the defendants.

Litigation history. Last month, the federal district court in New York City found that FrontPoint’s antitrust claim was adequately alleged as to the defending banking institutions that served on the SIBOR panel, but it dismissed the claim against the other defendants for failure to sufficiently allege their involvement in the conspiracy. Sonterra’s antitrust claim was dismissed against all of the defendants for failure to establish a connection between the alleged conduct and any injury to itself. The court also dismissed the plaintiffs’ RICO claims with prejudice, but it allowed FrontPoint’s contract claims alleging a breach of the implied covenant of good faith and fair dealing to proceed.

Propriety of settlement approval. The settlements should be preliminarily approved by the court, the plaintiffs argue, because they are procedurally and substantively fair. Both are "products of serious, informed, arm’s length negotiations between experienced counsel," according to the plaintiffs, and the respective payments by Citi and JPMorgan of $9,990,000 and $10,989,000 into the settlement fund were well within the range of what possibly may be found, at final approval, to be fair, reasonable, and adequate. Recovery on many of the claims being settled was not foreclosed because of the availability of joint and several liability recovery from the remaining defendants, the plaintiffs said. There were no obvious or other deficiencies in the settlements, and neither one favored or created any preferences between the representative plaintiffs or any class members.

In addition, the plaintiffs contend that the settlement class, defined as "all persons (including both natural persons and entities) who purchased, sold, held, traded, or otherwise had any interest in SIBOR and/or SOR-Based Derivatives during the class period," which ran from January 1, 2007 through December 31, 2011, satisfied each of the requirements for certification presented by Federal Rule of Civil Procedure 23(a) and 23(b)(3).

This case is No. 1:16-cv-05263-AKH.

Attorneys: Geoffrey Milbank Horn (Lowey Dannenberg P.C.) for FrontPoint Asian Event Driven Fund, Ltd., Sonterra Capital Master Fund, Ltd., FrontPoint Asian Event Driven Fund, L.P. and Fund Liquidation Holdings LLC. Alan M. Wiseman (Covington & Burling, LLP) and Joel Laurence Kurtzberg (Cahill Gordon & Reindel LLP) for Citibank, N.A. and CitiGroup Inc. Arthur J. Burke (Davis Polk & Wardwell LLP) and Lawrence Jay Portnoy (Davis Polk & Wardwell LLP) for Bank of America Corp.

Companies: FrontPoint Asian Event Driven Fund, Ltd.; Sonterra Capital Master Fund, Ltd.; FrontPoint Asian Event Driven Fund, L.P.; Fund Liquidation Holdings LLC; Citibank, N.A.; CitiGroup Inc.; Bank of America Corp.

MainStory: TopStory Antitrust NewYorkNews

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