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`
` 1:15-cv-00871 (SHS)
`
`OPINION & ORDER
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`SONTERRA CAPITAL MASTER FUND
`LTD., FRONTPOINT EUROPEAN FUND,
`L.P., FRONTPOINT FINANCIAL
`SERVICES FUND, L.P., FRONTPOINT
`HEALTHCARE FLAGSHIP ENHANCED
`FUND, L.P., FRONTPOINT
`HEALTHCARE FLAGSHIP FUND, L.P.,
`FRONTPOINT HEALTHCARE
`HORIZONS FUND, L.P., FRONTPOINT
`FINANCIAL HORIZONS FUND, L.P.,
`FRONTPOINT UTILITY AND ENERGY
`FUND L.P., HUNTER GLOBAL
`INVESTORS FUND I, L.P., HUNTER
`GLOBAL INVESTORS FUND II, L.P.,
`HUNTER GLOBAL INVESTORS
`OFFSHORE FUND LTD., HUNTER
`GLOBAL INVESTORS OFFSHORE FUND
`II LTD., HUNTER GLOBAL INVESTORS
`SRI FUND LTD., HG HOLDINGS LTD.,
`HG HOLDINGS II LTD., and FRANK
`DIVITTO, on behalf of themselves and all
`others similarly situated,
`Plaintiffs,
`
`
`-against-
`
`CREDIT SUISSE GROUP AG, CREDIT
`SUISSE AG, JPMORGAN CHASE & CO.,
`THE ROYAL BANK OF SCOTLAND PLC,
`UBS AG, BLUECREST CAPITAL
`MANAGEMENT LLP, DEUTSCHE BANK
`AG, DB GROUP SERVICES UK LIMITED,
`AND JOHN DOE NOS. 1-50,
`Defendants.
`
`

`

`E.
`F.
`
`G.
`
`Table of Contents
`I. Background ......................................................................................... 7
`A.
`Summary of CHF LIBOR .......................................................... 8
`B.
`Relationship between CHF LIBOR and Swiss Franc
`Derivatives ................................................................................. 8
`The Parties and the Types of Swiss Franc Derivatives ......... 9
`C.
`D. Alleged CHF LIBOR Manipulation....................................... 11
`1. Daily Fixes and Longer-Term Bias ..................................... 12
`2. Specific Instances of Manipulation .................................... 12
`a.
`Intra-Defendant Manipulation........................................ 13
`b.
`Inter-Defendant Collusion .............................................. 13
`3. Systemic Nature of Manipulation ...................................... 15
`Bid-Ask Manipulation ............................................................ 16
`Regulatory Investigations and Settlements with
`Defendants ............................................................................... 17
`The Complaint, Plaintiffs’ Claims, and the Proposed
`Class .......................................................................................... 18
`II. Article III Standing ........................................................................... 19
`A.
`Standard .................................................................................... 19
`B.
`Plaintiffs Lack Article III Standing to Bring Their
`Bid-Ask Spread Claims .......................................................... 20
`Plaintiffs Have Article III Standing to Bring Their CHF
`LIBOR Manipulation Claims with Respect to CHF
`Futures and FX Forwards ...................................................... 23
`Plaintiffs Have Class Standing to Bring Their CHF
`LIBOR Manipulation Claims with Respect to Interest
`Rate Swaps and NYSE LIFFE Exchange Futures
`Contracts .................................................................................. 27
`III. Standard of Review for Motion to Dismiss for Failure to
`State a Claim ..................................................................................... 29
`IV. Antitrust Claim (Count Two) ......................................................... 31
`A. Conduct in Violation of Section One .................................... 32
`1. The Alleged Conduct Constitutes a Restraint of
`Trade ...................................................................................... 32
`2. Plaintiffs Allege a Plausible Antitrust Conspiracy
`Against Only RBS ................................................................ 33
`B. Antitrust Standing ................................................................... 40
`
`C.
`
`D.
`
`
`
`2
`
`

`

`C.
`
`1. Plaintiffs Adequately Allege Antitrust Injury .................. 40
`2. Only the Direct Transaction Plaintiffs Are Efficient
`Enforcers ............................................................................... 42
`a. Directness of Causation of the Injury............................. 43
`b. Existence of More Direct Victims ................................... 48
`c. Speculative Damages ........................................................ 50
`d. Duplicative Recovery and Complex
`Apportionment ................................................................. 53
`Statute of Limitations .............................................................. 54
`1. The Complaint Fails to Allege Antitrust Violations
`Within the Four-Year Statute of Limitations.................... 55
`2. Count Two is Timely Because the Statute of
`Limitations is Tolled by the Fraudulent Concealment
`Doctrine ................................................................................. 56
`The FTAIA Does Not Bar Count Two .................................. 59
`D.
`V. CEA Claims (Counts Three, Four, and Five) ................................ 60
`A. The CEA Does Not Cover CHF FX Forwards ..................... 61
`B. Counts Three, Four, and Five Fail Because Plaintiffs
`Lack CEA Standing ................................................................. 61
`C. While Plaintiffs Lack CEA Standing, They Have
`Plausibly Alleged Manipulation by the Deutsche Bank
`Defendants, RBS, and UBS .................................................... 64
`D. While Plaintiffs Lack CEA Standing, They Have
`Plausibly Alleged Principal-Agent Liability Against the
`Deutsche Bank Defendants, RBS, and UBS ......................... 67
`E. While Plaintiffs Lack CEA Standing, They Have
`Plausibly Alleged Aiding and Abetting Liability
`Against RBS ............................................................................. 68
`The CEA Claims Are Timely Against All Defendants
`Except UBS ............................................................................... 68
`VI. RICO Claims (Counts Six and Seven) .......................................... 70
`A.
`Plaintiffs Have RICO Standing .............................................. 71
`B.
`The Complaint Adequately Alleges Conduct that
`Violates RICO Only as to RBS .............................................. 72
`1. The Complaint Adequately Alleges an Association-in-
`Fact RICO Enterprise Only as to RBS ............................... 72
`
`F.
`
`
`
`3
`
`

`

`C.
`
`D.
`
`2. The Complaint Adequately Alleges Two Predicate
`Acts of Wire Fraud by RBS ................................................. 73
`3. The Complaint Adequately Alleges that RBS Engaged
`in a Pattern of Racketeering Activity ................................ 75
`The Complaint Adequately Alleges a RICO Conspiracy
`Only as to RBS ......................................................................... 76
`The RICO Claims Are Dismissed in Full as
`Impermissibly Extraterritorial .............................................. 76
`Plaintiffs’ RICO Claims Are Timely ...................................... 81
`E.
`VII. The Court Declines to Exercise Supplemental Jurisdiction
`over the State Law Claims (Counts Eight and Nine) ............... 82
`VIII. Personal Jurisdiction ..................................................................... 83
`A. Defendants’ Operations and U.S. Connections ................... 84
`1. BlueCrest ................................................................................ 84
`2. The Credit Suisse Defendants ............................................. 84
`3. Deutsche Bank AG ............................................................... 85
`4. DB Group Services ............................................................... 85
`5. RBS .......................................................................................... 85
`6. UBS ......................................................................................... 85
`Personal Jurisdiction Standard .............................................. 86
`B.
`C. No Defendant Has Consented to the Court’s General
`Jurisdiction ............................................................................... 86
`Specific Jurisdiction ................................................................. 89
`D.
`1. Standard ................................................................................. 90
`2. The National Contacts Test Applies to Plaintiffs’
`Federal Claims ...................................................................... 91
`3. Bloomberg Chats Transmitted Through Servers in
`New York Do Not Constitute Meaningful Contacts
`with the Forum ..................................................................... 92
`4. Defendants Causing Thomson Reuters To Disseminate
`False CHF LIBOR into the United States Does Not
`Itself Create Sufficient Contacts ......................................... 93
`5. The Court Has Personal Jurisdiction Over RBS, UBS,
`the Credit Suisse Defendants and Deutsche Bank AG
`Because Manipulating CHF LIBOR for the Purpose of
`Profiting from Transactions in CHF LIBOR-Based
`
`
`
`4
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`

`

`Derivatives within the United States Constitutes
`Purposeful Availment of the Forum ................................. 94
`6. The Court Lacks Personal Jurisdiction Over DB Group
`Services and BlueCrest Because They Are Not
`Plausibly Alleged to Have Transacted in CHF
`LIBOR-Based Derivatives in the United States .............. 102
`7. RBS’s Conspiracy from Abroad with JPMorgan in the
`Forum Reinforces the Conclusion that RBS Is Subject
`to the Court’s Jurisdiction ................................................. 103
`Fair Play and Substantial Justice ......................................... 106
`E.
`Jurisdictional Discovery ....................................................... 106
`F.
`IX. Leave to Replead ............................................................................ 107
`X. Conclusion ....................................................................................... 108
`
`
`
`SIDNEY H. STEIN, U.S. District Judge.
`
`This putative class action is based primarily on allegations that
`defendants unlawfully manipulated the Swiss franc London InterBank
`Offered Rate (“CHF LIBOR”), a daily interest rate benchmark designed to
`reflect the cost at which large banks are able to borrow Swiss francs.
`According to plaintiffs’ First Amended Complaint (the “Complaint”),
`changes in CHF LIBOR affect the prices of numerous Swiss franc currency
`derivatives, such as Swiss franc foreign exchange forwards (“CHF FX
`forwards”) and Swiss franc futures contracts (“CHF futures contracts”).
`The Complaint alleges that from at least January 1, 2001 through at least
`December 31, 2011 (the “Class Period”) defendants – eight large financial
`institutions – conspired to manipulate CHF LIBOR, and thereby the prices
`of those derivatives, to benefit their own trading positions in Swiss franc
`currency derivatives. The essence of plaintiffs’ claims is that they and
`others similarly situated were on the losing end of that manipulation,
`transacting in Swiss franc derivatives with defendants and third parties
`during the Class Period on terms made less favorable by (1) defendants’
`fixing of CHF LIBOR and (2) certain defendants’ collusion to increase the
`“bid-ask spread” on transactions in those derivatives. Based on this
`alleged misconduct, the Complaint asserts claims against all defendants
`under the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., the Commodities
`
`
`
`5
`
`

`

`Exchange Act (“CEA”), 7 U.S.C. §§ 1, et seq., and the Racketeer Influenced
`and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961, et seq., as well
`as state law claims against defendants Credit Suisse AG, Credit Suisse
`Group AG, and UBS AG for unjust enrichment and breach of the implied
`covenant of good faith and fair dealing.
`
`The Complaint draws its allegations largely from the statements of
`fact accompanying numerous settlements, for an aggregate value of over
`$7 billion, that defendants have reached with U.S. and European
`regulators arising from their alleged manipulation of LIBOR for Swiss
`francs and several other currencies. Allegations of LIBOR manipulation,
`and the resulting regulatory investigations and settlements, have received
`widespread media coverage. In recent years, several purported class
`actions have also been filed in this judicial district alleging similar
`manipulation of LIBOR rates for other currencies. See, e.g., In re: LIBOR-
`Based Fin. Instruments Antitrust Litig. (“LIBOR I”), 935 F. Supp. 2d 666
`(S.D.N.Y. 2013) (U.S. dollars); Laydon v. Mizuho Bank, Ltd., No. 12-cv-3419,
`2014 WL 1280464 (S.D.N.Y. Mar. 28, 2014) (Yen); Sullivan v. Barclays PLC,
`No. 13-cv-2811, 2017 WL 685570 (S.D.N.Y. Feb. 21, 2017) (Euros).
`
`Currently before the Court are defendants’ motions to dismiss the
`Complaint.1 While these motions were pending, plaintiffs and defendant
`JPMorgan Chase & Co. (“JPMorgan”) executed an agreement to settle all
`claims against JPMorgan on a class-wide basis. See Doc. 146. Accordingly,
`the motions to dismiss are deemed withdrawn as to JPMorgan without
`prejudice to refiling in the event the Court does not approve the class
`settlement with JPMorgan, and allegations against JPMorgan will be
`recounted only as relevant to the remaining defendants. Each of the
`remaining seven defendants move to dismiss the Complaint for lack of
`subject matter jurisdiction, lack of personal jurisdiction, and failure to state
`
`
`1 Two separate motions are addressed in this opinion: (1) the motion of Credit Suisse
`Group AG, Credit Suisse AG, The Royal Bank of Scotland PLC, UBS AG, Deutsche
`Bank AG, and DB Group Services UK Limited to dismiss for lack of subject matter
`jurisdiction and failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(1), (b)(2), and
`(b)(6) [Doc. 63]; and (2) the motion of BlueCrest Capital Management Group, LLP, to
`dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure
`to state a claim pursuant to Fed. R. Civ. P. 12(b)(1), (b)(2), and (b)(6) [Doc. 74].
`
`
`
`6
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`

`

`a claim. See Fed. R. Civ. P. 12(b)(1), 12(b)(2), and 12(b)(6). These motions
`encompass a variety of challenges to the Complaint: ranging from
`standing, timeliness, extraterritoriality, and personal jurisdiction to nearly
`each element of every claim.
`
`The Court concludes that the Complaint fails to state any claim for
`which relief can be granted. As an initial matter, plaintiffs lack Article III
`standing to sue for the manipulation of bid-ask spreads because they have
`not alleged that they were injured by that manipulation. With respect to
`plaintiffs’ antitrust claim for manipulation of CHF LIBOR, the Complaint
`fails to plausibly allege an antitrust conspiracy against any defendant
`except RBS. While the Complaint makes numerous detailed allegations
`that several defendants independently manipulated CHF LIBOR, it is
`devoid of specific or plausible allegations that defendants other than RBS
`conspired with each other to do so. Moreover, plaintiffs’ antitrust claim
`against RBS fails for lack of antitrust standing because plaintiffs did not
`transact in CHF LIBOR-based derivatives with RBS and therefore are not
`“efficient enforcers” of the antitrust laws. Plaintiffs’ CEA claims fail
`because they have not provided sufficient details about their transactions
`to plausibly allege that they were injured by defendants’ alleged
`manipulation of CHF LIBOR. Plaintiffs’ RICO claims are dismissed as
`impermissibly extraterritorial because the alleged scheme to manipulate
`CHF LIBOR was, with limited exceptions, centered in Europe and touched
`the United States only as part of a global scheme. Because the Complaint
`fails to state a viable claim under federal law, the Court declines to exercise
`its supplemental jurisdiction over the state law claims.
`
`For these reasons and those provided below, defendants’ motions
`to dismiss are granted, and plaintiffs’ claims are dismissed in full with
`leave to replead.
`
`I.
`
`BACKGROUND
`
`The following facts are as alleged in the Complaint and are taken as
`
`true solely for the purpose of these motions.
`
`
`
`7
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`

`

`A.
`
`Summary of CHF LIBOR
`
`CHF LIBOR is determined and disseminated by the British Bankers
`
`Association (“BBA”) in London. To set CHF LIBOR, each trading day
`twelve “contributor panel banks” – including five of the eight defendants
`in this case – submit to the BBA the interest rate at which they could
`borrow Swiss francs “in a reasonable market size just prior to 11:00 A.M.
`London time.” Compl. ¶ 71. The twelve contributor banks submit quotes
`for fifteen different borrowing durations, or “tenors,” ranging from
`overnight to twelve months. Id. ¶ 72. Acting as an agent for the BBA,
`Thomson Reuters calculates CHF LIBOR for each tenor by ranking the
`quotes in numerical order and then averaging the middle 50% of the
`quotes, disregarding the bottom 25% and top 25%.2 The resulting number,
`referred to as the “fix,” becomes the official CHF LIBOR for each tenor and
`is disseminated globally, along with each bank’s submission, by Thomson
`Reuters and other financial services platforms, including into the United
`States through U.S. wires. Id. ¶ 73. To ensure the integrity of the rate
`setting process, BBA guidelines require that contributor banks submit
`quotes without regard for any factor unrelated to their cost of borrowing
`Swiss francs.
`
`B.
`
`Relationship between CHF LIBOR and Swiss Franc
`Derivatives
`
`The Complaint identifies several types of Swiss franc currency
`
`derivatives as “Swiss franc LIBOR-based derivatives” that it maintains are
`each “priced, benchmarked, and/or settled using a mathematical formula
`that incorporates Swiss franc LIBOR as one of its terms.” Compl. ¶ 86.
`Because of this incorporation, the Complaint alleges, the values of these
`derivatives are manipulated when CHF LIBOR is manipulated. For
`example, both CHF futures contracts and CHF FX forwards “are
`agreements to buy or sell a certain amount of Swiss francs in terms of
`another currency, e.g., U.S. Dollars, on some future date,” and the “cost of
`
`
`2 For example, if all twelve contributor banks submitted quotes, the bottom three and
`top three quotes would be discarded, with CHF LIBOR set as the average of the
`middle six quotes.
`
`
`
`8
`
`

`

`buying or selling Swiss francs in the future is determined using an
`industry standard formula that incorporates Swiss franc LIBOR.” Id. ¶ 87.
`According to the Complaint, a decline in CHF LIBOR causes an increase in
`the future price of Swiss francs, which increases the value of CHF futures
`contracts and CHF FX forwards. See id. ¶¶ 194-95.
`
`The Complaint purports to demonstrate that CHF LIBOR was
`artificial throughout the Class Period through a statistical analysis
`comparing CHF LIBOR to the rate of borrowing Swiss francs in “actual
`money market transactions.” Id. ¶ 181. While there should have been little
`to no difference between CHF LIBOR and the actual cost of borrowing,
`plaintiffs allege, their analysis revealed a substantial discrepancy.
`
`C.
`
`The Parties and the Types of Swiss Franc Derivatives
`
`Five of the defendants – UBS AG (“UBS”), The Royal Bank of
`
`Scotland PLC (“RBS”), JPMorgan Chase & Co. (“JPMorgan”), Credit Suisse
`Group AG (“Credit Suisse Group”), and Deutsche Bank AG (collectively,
`the “Contributor Bank Defendants”) – are among the twelve “contributor
`banks” whose quotes set CHF LIBOR.3 Compl. ¶ 4. Defendants Credit
`Suisse AG and DB Group Services UK Limited (“DB Group Services”) are
`subsidiaries of Credit Suisse Group4 and Deutsche Bank AG,5 respectively.
`The last defendant, BlueCrest Capital Management LLP (“BlueCrest”), is
`an investment advisory services firm alleged to have requested that
`Deutsche Bank AG submit an artificial CHF LIBOR quote.
`
`
`3 According to defendants, “JPMorgan Chase & Co. is a financial holding company
`that was never a member of the panel of banks that submitted or contributed to Swiss
`franc LIBOR, though its affiliate was a panel bank. Similarly, Credit Suisse Group AG
`is a financial holding company that was never a member of the panel of banks that
`submitted or contributed to Swiss franc LIBOR, though its affiliate, Credit Suisse AG,
`was a panel bank.” Doc. 73 at 3 n.2.
`
`4 Credit Suisse Group AG and Credit Suisse AG are collectively referred to as the
`“Credit Suisse Defendants.”
`
`5 Deutsche Bank AG and DB Group Services UK Limited are collectively referred to
`as the “Deutsche Bank Defendants.”
`
`
`
`9
`
`

`

`JPMorgan is a Delaware financial holding company with its
`headquarters in New York, NY. Each of the other defendants are
`headquartered and incorporated in Europe but are alleged to have
`substantial operations within the United States or affiliates and/or
`subsidiaries with substantial operations within the United States (the
`“Foreign Defendants”). See id. ¶¶ 38-66.
`
`Plaintiffs are investment funds, financial services companies, and
`
`one individual who allege that during the Class Period they suffered
`injury by entering into U.S.-based transactions for two types of Swiss franc
`LIBOR-based derivatives – (1) Swiss franc currency futures contracts, and
`(2) Swiss franc FX forwards – at artificial prices caused by defendants’
`manipulation of CHF LIBOR. While plaintiffs themselves transacted in
`only these two types of derivatives, they seek to represent a class of those
`who transacted in any type of “Swiss franc LIBOR-based derivatives,”
`defined to encompass “over-the-counter instruments, such as interest rate
`swaps, forward rate agreements, foreign exchange forwards, cross-
`currency swaps, overnight index swaps, and tenor basis swaps, as well as
`exchange-traded futures and options, such as the three-month Euro Swiss
`franc futures contract traded on the NYSE LIFFE Exchange and the Swiss
`franc currency futures contract traded on the CME.” Id. ¶ 75.
`
`Plaintiff Frank Divitto, an Ohio resident, alleges that he transacted
`
`in Swiss franc currency futures contracts traded on the Chicago Mercantile
`Exchange (“CME”). Id. ¶ 37. The Complaint does not provide any details
`of these transactions, beyond stating that they occurred “[d]uring the Class
`Period.” Id. According to the Complaint, Swiss franc futures contracts are
`“standardized bilateral agreements that call for the purchase or sale of an
`underlying commodity on a certain future date.” Id. ¶ 76. “For example,
`a June 2015 CME Swiss franc currency futures contract is an agreement for
`the purchase or sale of CHF 125,000 in exchange for U.S. Dollars on the
`third Wednesday of June 2015. This futures contract is ‘standardized’ and
`trades in accordance with the rules specified by the CME, a Designated
`Contract Market pursuant to Section 5 of the CEA (7 U.S.C. § 7).” Id. For a
`futures contract traded on an exchange such as the CME the exchange
`functions as the intermediary, and there is no identifiable counterparty, as
`there would be for an “over the counter” (“OTC”) transaction.
`
`
`
`10
`
`

`

`Aside from Divitto, each plaintiff claims to have transacted in Swiss
`
`franc FX forwards. Whereas Swiss Franc futures contracts are traded on
`an exchange, other types of Swiss franc based derivatives trade over the
`counter in transactions directly between private parties. A CHF FX
`forward agreement is “the OTC equivalent to a currency futures contract,”
`under which the parties “agree to buy or sell a custom amount of Swiss
`francs at a specified price on a certain date.” Id. ¶ 81. FX forwards can be
`attractive because they provide “similar functionality to the standardized
`exchange-traded contracts but with greater flexibility, allowing the parties
`to customize certain terms such as duration of their agreement, the
`‘notional amount,’ i.e., total value, of the contract, and the settlement
`date.” Id.
`
`Plaintiffs FrontPoint Healthcare Flagship Enhanced Fund, L.P.,
`
`FrontPoint Healthcare Flagship Fund, L.P., and FrontPoint Healthcare
`Horizons Fund, L.P. (the “Direct Transaction Plaintiffs”) allege that they
`transacted in FX forwards “directly with Defendants UBS and Credit
`Suisse.” Id. ¶¶ 23-25. According to the Complaint, the Direct Transaction
`Plaintiffs entered into “over 400 Swiss franc currency forwards with Credit
`Suisse and over 1,300 Swiss franc currency forwards with UBS.” Id. ¶ 310.
`The Complaint provides specific dates and amounts for some of these
`transactions, in contrast with the Divitto allegations. See id. ¶¶ 202-04.
`
`The remaining plaintiffs allege that they transacted in Swiss franc
`
`FX forwards with third parties at prices that were artificial due to
`defendants’ manipulation. According to the Complaint, trillions of dollars
`in Swiss franc LIBOR-based derivatives were traded within the United
`States during the Class Period. Id. ¶ 80.
`
`D.
`
`Alleged CHF LIBOR Manipulation
`
`Plaintiffs allege that defendants abused their control over CHF
`
`LIBOR to move the price of these Swiss franc LIBOR-based derivatives in
`whatever direction benefited their own trading positions or those of their
`coconspirators. According to the Complaint, “[t]he Contributor Bank
`Defendants made false Swiss franc LIBOR submissions in response to
`requests from their own Swiss franc LIBOR-based derivatives traders,
`including traders in the United States, as well as those made by co-
`
`
`
`11
`
`

`

`conspirator banks, hedge funds, and inter-dealer brokers, some of which
`are based in the United States.” Compl. ¶ 99.
`
`1.
`
`Daily Fixes and Longer-Term Bias
`
` The Complaint alleges two forms of CHF LIBOR manipulation.
`
`First, defendants’ traders allegedly requested “fixings” on specific “days
`where one or more of the Defendants had a Swiss franc LIBOR-based
`derivatives position that was going to be priced, benchmarked and/or
`settled based on Swiss franc LIBOR.” Compl. ¶ 100. Second, “Defendants
`also requested false Swiss franc LIBOR submissions to inject a certain ‘bias’
`into the Swiss franc LIBOR fixing, permanently manipulating specific
`tenors higher or lower by making false submissions over long periods of
`time.” Id. ¶ 101.
`
`As will be significant in assessing the plausibility of the alleged
`
`conspiracy, both the “daily fixes” and the longer-term “bias” are alleged to
`have manipulated CHF LIBOR “higher or lower” depending on which
`would profit whatever defendants’ derivatives positions were at that time,
`rather than in any consistent direction. Id. ¶¶ 101, 129. This is in contrast
`to some of the other recent cases alleging LIBOR manipulation based on a
`theory of persistent suppression, in which contributor banks made
`“submission[s] reporting an artificially low cost of borrowing” in order to
`“project financial health.” Gelboim v. Bank of America Corp., 823 F.3d 759,
`766 (2d Cir. 2016).
`
`2.
`
`Specific Instances of Manipulation
`
`The Complaint provides specific examples of defendants’ requests
`
`for manipulation taken from government regulators’ statements of fact
`accompanying their settlements with defendants. These examples include
`both requests to a defendant to submit false LIBOR quotes made by a
`defendant’s own trader (which the Court will refer to as “intra-defendant
`manipulation”) and requests to a defendant to submit false LIBOR quotes
`made by a different defendant (which the Court will refer to as “inter-
`defendant collusion”). Because the distinction between intra-defendant
`manipulation and inter-defendant collusion will be quite significant for
`
`
`
`12
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`

`

`plaintiffs’ antitrust and RICO claims, the specific allegations concerning
`the two are summarized separately.
`
`a.
`
`Intra-Defendant Manipulation
`
`With respect to intra-defendant manipulation, the Complaint is
`
`replete with specific instances of UBS, RBS, and Deutsche Bank AG
`manipulating their own submissions to benefit their own trading
`positions. For example, on July 5, 2006, a UBS submitter agreed to a UBS
`Swiss franc derivative trader’s request “for high 1 month fix.” Compl. ¶
`103. Similarly, on October 3, 2008, a Deutsche Bank AG submitter agreed
`to a Deutsche Bank AG trader’s request for “very low 1 month please.” Id.
`¶ 109. And on October 21, 2008, the “primary submitter” for RBS
`accommodated an RBS Swiss franc trader’s request that “we need that
`libor down fast.” Id. ¶ 191.
`
`These specific instances are alleged to be emblematic of a systemic
`
`pattern of conduct throughout the Class Period. The Complaint claims
`that, “[s]tarting at least as early as 2001, and continuing until at least
`September 1, 2009, on each trading day on which UBS had Swiss franc
`trading positions, UBS’s Swiss franc LIBOR submitters rounded UBS’s
`Swiss franc LIBOR submissions to benefit UBS’s global Swiss franc trading
`positions.” Id. ¶ 117. According to the Complaint, Deutsche Bank AG
`“had a similar policy in place, focused on policing the ‘spread’ or
`difference between certain tenors of LIBOR, including Swiss franc LIBOR.”
`Id. ¶ 119. “Deutsche Bank’s LIBOR submitters, including those who made
`Swiss franc LIBOR submissions, routinely built this spread ‘bias’ into
`Deutsche Bank’s LIBOR submissions, pushing the spread between
`different tenors of LIBOR wider, even in the absence of written
`communications from traders requesting a specific false rate.” Id. ¶ 120.
`And the Complaint alleges that RBS traders requested false CHF LIBOR
`submissions “continuously during Class Period . . . as often as several
`times each week.” Id. ¶ 102.
`
`b.
`
`Inter-Defendant Collusion
`
`Turning to the claims of inter-defendant collusion, the specific
`
`allegations as to several defendants are sparse. Indeed, the Complaint
`
`
`
`13
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`

`

`itself characterizes these allegations as the “handful of examples of inter-
`Defendant communications released in the government settlements to
`date.”6 Compl. ¶ 123. BlueCrest – which was not a contributor bank and
`therefore would have had to collude with a contributor bank in order to
`manipulate CHF LIBOR – is alleged to have requested a false one-month
`CHF LIBOR submission from Deutsche Bank AG on February 10, 2005,
`stating: “Can’t you ask your fft to contribute 1m chf libor very low
`today?? I have 10 yr of fix, 8 of which against ubs, and they’re getting on
`my nerves.” Id. ¶ 131. The Complaint does not allege that Deutsche Bank
`AG responded to this request, much less that it submitted a false CHF
`LIBOR quote in response to the request. And, in something of a hybrid of
`intra-defendant manipulation and
`inter-defendant
`collusion,
`the
`Complaint alleges that Deutsche Bank AG manipulated CHF LIBOR at the
`request of derivative traders at DB Group Services, its affiliate. See id. ¶¶
`111-13.
`
`The allegations of inter-defendant collusion are strongest against
`RBS. The Complaint contains multiple specific allegations of RBS traders
`discussing manipulation of CHF LIBOR with an unidentified “Bank E.” Id.
`¶¶ 124, 213, & App’x. Additionally, the European Commission found that
`“RBS and JPMorgan operated a cartel aimed at manipulating Swiss franc
`LIBOR to
`‘distort the normal pricing of
`interest rate derivatives
`denominated in Swiss franc.’” Id. ¶ 139. In a supplemental brief, plaintiffs
`allege that documents JPMorgan recently produced pursuant to its
`settlement of this action further corroborate that a JPMorgan trader in
`New York conspired with an RBS trader in Europe to repeatedly
`manipulate CHF LIBOR.
`
`The Complaint also alleges that RBS manipulated CHF LIBOR
`through a “hub and spoke” conspiracy in which “inter-dealer brokers”
`accepted “requests for false LIBOR submissions from panel banks and
`
`
`6 The Complaint attempts to supplement this “handful” through instances of
`defendants manipulating LIBOR for other currencies, such as Yen. See, e.g., Compl. ¶
`136. But plaintiffs cannot rely on manipulation of a separate currency to make out
`their claims here. See In re Libor-Based Fin. Instruments Antitrust Litig. (“LIBOR IV”),
`No. 11-MDL-2262, 2015 WL 4634541, at *38 (S.D.N.Y. Aug. 4, 2015).)
`
`
`
`14
`
`

`

`other market participants and coordinated the submissions of other panel
`members to move the market in the agreed upon direction.” Id. ¶¶ 133-34.
`The Complaint cites a United Kingdom Financial Services Aut