The legal brawl over metal price fixing by banks continues. This time a class-action lawsuit has been brought against The Goldman Sachs Group, Inc. (GS) and HSBC Holdings plc (HSBC) by Modern Settings LLC, a Florida-based jewelry business company, alleging the banks of being engaged in the manipulation of prices of precious metals – platinum and palladium – for eight years. Two other defendants in this case are Germany based major global chemical company BASF SE and South Africa-based Standard Bank Group Ltd.
Platinum and Palladium are mostly used in jewelry products and in catalytic converters that restrict harmful emissions from vehicles.
Per the complaint filed in the U.S. District Court in Manhattan, the defendants were accused of engaging in conspiracy since 2007 for fixing the prices of platinum and palladium and the prices of futures and options tied with those fixings. Modern Settings, which bought the metals, alleged that the four companies shared clients’ confidential information including sales and purchase data and misused the information to gain from price movements. These caused buyers of the metals to incur huge losses.
Per the lawyers of Modern Settings “This unlawful behavior allowed defendants to reap substantial profits, while non-insiders, which include plaintiffs and members of the class, were injured”. The plaintiffs are seeking compensation on account of the violations of U.S. commodities and antitrust laws by the companies.
Several similar other lawsuits have been filed this year against banks by the metals buyers, accusing them of fixing prices of gold and silver.
As global authorities gradually detected price-rigging in interbank-loan rates and currencies, regulators have tightened scrutiny of pricing benchmarks. Stricter regulations have led to new price setting platforms for gold, silver, platinum and palladium. Also, efforts by regulators in ending price fixing suits have resulted in several settlements with the alleged financial institutions in the recent times.
Recently, the U.S. Commodity Futures Trading Commission (‘CFTC’), the U.K. Financial Conduct Authority (‘FCA’) and the Swiss Financial Market Supervisory Authority entered into settlement agreements with Citigroup Inc. (C) JPMorgan Chase & Co. (JPM), The Royal Bank of Scotland Group plc (RBS), HSBC Holdings and UBS AG (UBS), totaling around $3.4 billion for settling charges of foreign exchange market manipulation. (Read more: Another Blow to Global Banks: Fined Billions for FX Manipulation)
Currently, Goldman sports a Zacks Rank #2 (Buy) while HSBC Holdings carries a Zacks Rank # 3(Hold).
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