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Pair of Class Actions Allege Widespread Treasury Auction Manipulation

July witnessed the filing of two nationwide class action lawsuits alleging collusion by prominent financial institutions to manipulate auctions for U.S. treasury bills, notes, bonds, and other instruments ("treasury securities"), with significant injury to investors and an extensive impact on the U.S. economy. ,

The first suit was filed by the State-Boston Retirement System ("State-Boston"), a pension fund for public employees of the City of Boston, while the second was filed by the United Food and Commercial Workers International Union ("UFCW"). Between the two cases, defendants consist of a group of more than 20 financial institutions, including Goldman Sachs, Citigroup, Barclays, and Deutsche Bank, who are approved to buy and sell treasury securities directly from the government as primary dealers., Investors, including the putative class members, purchase treasury securities through primary dealers, which participate in treasury auctions to cover their sales.

The complaints in each case allege that the defendants colluded to reduce their own trading risk and inflate the price of securities sold on secondary markets, thereby violating the Sherman Antitrust Act, the Clayton Antitrust Act, and the Commodity Exchange Act. The State-Boston complaint claims that economic expert analysis confirms manipulation of the treasury securities market during the putative class period and alleges various methods of collusion, including the defendants' use of secret chat rooms and code language to exchange customer information and coordinate trading strategies.

In recent years, large financial institutions have been investigated, prosecuted, and fined for their part in manipulation schemes with respect to the London Interbank Offered Rate, foreign exchange markets, and other instruments and exchanges. The allegations advanced by State-Boston and the UFCW are particularly noteworthy because the rates set at treasury auctions impact interest rates for consumer credit, corporate debt, and other benchmarks across the economy. The UFCW's complaint flatly states that this alleged manipulation "puts traders' self-interests above the integrity of the financial markets."

Shepherd, Finkelman, Miller & Shah, LLP is representing the UFCW in this action. This blog will report updates as available.

The legal team at SFMS has significant experience litigating securities matters. If you have any questions regarding this subject or this posting, please contact Valerie Chang ([email protected]) or Alec Berin ([email protected]). We can also be reached toll-free at (866) 540-5505.

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See State-Boston Retirement System v. Bank of Nova Scotia et al., Case No. 15-cv-05794 (S.D.N.Y)

See United Food and Commercial Workers Union and Participating Food Industry Employers Tri-State Pension Fund v. Bank of Nova Scotia, et al., Case No.1:15-cv-04931 (S.D.N.Y)


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