NEW YORK CITY: A South Korean electronics firm has sued leading global banks in New York City for manipulating the foreign exchange market as regulators in several countries investigate similar allegations.
Circuit board maker Simmtech filed a class action suit last Friday (Saturday in Manila) in the New York Federal District Court, alleging that traders in the banks colluded to distort prices on the $5-trillion a day global forex market, cheating clients.
The suit said that the traders operated in secret groups known as “The Bandits’ Club” and “The Cartel” to distort the base rates on which clients trade for their own and their banks’ benefits.
It named seven banks, and subsidiaries, which it said control 60 percent of the global forex (FX) trade: Barclays, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland (RBS) and UBS.
The alleged manipulation of the market reference rate, known as the WM/Reuters Rates, “affected the pricing of trillions of dollars’ worth of financial transactions in the United States and around the world, including FX trades and other instruments such as pensions and savings accounts that track global indices,” the suit said.
The banks “conspired to artificially set WM/Reuters Rates, communicating with each other through instant message to align strategy on a routine basis,” they said.
Simmtech was the plaintiff named in the suit filed by the New York law firm of Kim and Bae, but a company attorney, John Rue, told Agence France-Presse that other South Korean companies could join the suit.
The suit followed a class-action complaint against the same banks filed in early November by pension fund manager Haverhill Retirement System.
Authorities in the United States, Britain, Switzerland, Hong Kong and Singapore have opened probes into foreign-exchange market manipulation, according to the suits.
Last week, US Attorney General Eric Holder confirmed the US investigation, telling The New York Times that, “the manipulation we’ve seen so far may just be the tip of the iceberg.”
“We’ve recognized that this is potentially an extremely consequential investigation,” he said.