London Silver Fixing Plaintiffs v. London Silver Fixing Defendants
Filing
68
OPINION AND ORDER: re: (302 in 1:14-md-02573-VEC) JOINT MOTION to Dismiss the Third Consolidated Amended Class Action Complaint filed by Barclays Capital Inc., Barclays Bank PLC, Barclays Capital Services Ltd. The Non-Fixing Banks' motion to dismiss is GRANTED. Plaintiffs' claims against the Non-Fixing Banks are DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to close the open motion at docket entry 302 and terminate defendants Barclays, Standard Chartered, BNP Paribas, BAML, and UBS from the case. The remaining parties are directed to appear for a status conference with the Court at 11:00 a.m. on August 24, 2018. By August 17, 2018, the parties must submit a joint letter ofnot more than 5 pages setting forth a pro posed schedule for discovery in this action. The parties are forewarned that the Court will not accept dueling letters; the parties are required to work together to produce a joint letter. SO ORDERED., ( Status Conference set for 8/24/2018 at 11:00 A M before Judge Valerie E. Caproni.), Bank Of America Corporation, Bank of America, N.A., Barclays Bank PLC, Barclays Capital Inc., Barclays Capital Services Ltd., Merrill Lynch, Pierce, Fenner & Smith Inc., Standard Chartered Bank, Standard Chartered Bank, BNP Paribas Fortis S.A./N.V. and BNP Paribas Fortis S.A./N.V. terminated. (Signed by Judge Valerie E. Caproni on 7/25/2018) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------ X
IN RE:
:
:
LONDON SILVER FIXING, LTD.,
:
:
ANTITRUST LITIGATION
:
:
This Document Relates to All Actions
------------------------------------------------------------ X
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:
DATE FILED: 7/25/2018
14-MD-2573 (VEC)
14-MC-2573 (VEC)
OPINION AND ORDER
VALERIE CAPRONI, United States District Judge:
This case began as a benchmark-fixing case. Until 2013, the price of silver bullion was
set in part through a daily private auction among a small group of silver dealers (“the Silver
Fixing”). Based on a sophisticated econometric analysis of thousands of price quotes from the
silver markets, Plaintiffs alleged that this daily private auction was a cover for a conspiracy
among the participating banks, Deutsche Bank, HSBC, and Bank of Nova Scotia (together, the
“Fixing Banks”), to suppress the price for physical silver and silver-denominated financial
products.
In September 2016, the Court held that Plaintiffs had stated claims against HSBC and
Bank of Nova Scotia. Plaintiffs settled with Deutsche Bank for $38 million dollars and what
Plaintiffs hoped would be a treasure trove of preserved electronic chat messages among precious
metals traders employed by Deutsche Bank and traders at Bank of America, Barclays, Standard
Chartered, BNP Paribas, and UBS (the “Non-Fixing Banks”). The chat messages, many of
which are quoted in the Third Amended Complaint (the “TAC”) (Dkt. 258), appear to document
sharing of proprietary information and episodic attempts to coordinate trading, apparently in the
hopes of profiting from resulting movement in the prices of silver and silver-denominated
financial instruments. After acquiring these chat messages, Plaintiffs amended their complaint to
1
allege that the Non-Fixing Banks conspired with the Fixing Banks and among themselves to
manipulate the Silver Fixing and the silver markets more generally.
But what Plaintiffs represented to be a mother lode of evidence of a vast conspiracy turns
out to be less than overwhelming. The Non-Fixing Banks have moved to dismiss on the grounds
that the chat messages do not connect them to a conspiracy with the Fixing Banks and do not
document any actionable manipulation of the silver markets (among other things). For the
reasons that follow, the Court agrees in part. Plaintiffs’ allegations of an overarching conspiracy
involving the Fixing Banks and Non-Fixing Banks are implausible. The chat messages provide a
basis to infer the existence of a more limited conspiracy to episodically manipulate the silver
markets, but Plaintiffs lack antitrust standing to bring a claim based on that theory. Plaintiffs
also fail to allege market manipulation by any of the Non-Fixing Banks. Thus, the Non-Fixing
Banks’ motion to dismiss is GRANTED.
BACKGROUND
From 1897 to 2014, the price of silver bullion was set through the Silver Fixing. See In
re London Silver Fixing, Ltd., Antitrust Litig., 213 F. Supp. 3d 530, 542 (S.D.N.Y. 2016) (“Silver
I”). During the relevant period, 2007 to 2013, the Silver Fixing was conducted during a private
conference call among the Fixing Banks at noon London time. Id. at 542, 544. The daily fixing
operated through a “Walrasian” auction. Id. at 542. Each Fixing Bank would announce how
much silver they wished to buy or sell at a given price—based on client orders and proprietary
demand—and the price would be adjusted until an equilibrium of supply and demand was
reached. Id. The market-clearing price, or the “Fix Price,” was then published to the market. Id.
The Second Amended Class Action Complaint (the “SAC”) (Dkt. 63) alleged that the
Silver Fixing was a cover for a long-running conspiracy to suppress artificially the price of
2
physical silver and silver-denominated financial instruments. 213 F. Supp. 3d at 543–44.
Relying on an econometric analysis of the spot market for physical silver and the market for
Commodity Exchange, Inc. (“COMEX”) silver futures, Plaintiffs alleged that silver prices
“moved downward around the Silver Fixing much more frequently than [they] moved upward”
and more frequently than would be expected in an efficient market. See id. at 544. Plaintiffs
also alleged that the declines began shortly before the Silver Fixing call started. Id. On days
when the Fix Price moved downward from the prevailing price before the call, there was, on
average, a 15 basis point drop in COMEX silver futures and spot silver prices at the start of the
Silver Fixing. Id.
Plaintiffs tied the Fixing Banks to this anomalous behavior by analyzing publiclyavailable trading data. According to Plaintiffs, on approximately 1900 days the Fixing Banks
and defendant UBS quoted below-market prices for silver-denominated assets in the minutes
leading up to and during the Silver Fixing. Id. at 545. Trading volume also increased
significantly in the run up to the Silver Fixing. Id. For example, between 2007 and 2013,
trading volume in COMEX silver futures began to increase just before the Silver Fixing and
peaked during the Fixing call at more than three-times pre-Fixing volume. Id. During the same
period, trades in COMEX silver futures successfully anticipated the direction of the Fix Price
with 83.6% accuracy. Id. at 546; see also id. (describing in detail statistical analysis showing
volume spikes prior to and during the Silver Fixing). According to Plaintiffs, these trends are
circumstantial evidence of trading by the Fixing Banks to take advantage of their advance
knowledge of the Fix Price. Id. at 545.
In Silver I, the Court denied the Fixing Banks’ motion to dismiss and granted UBS’s
motion to dismiss. The Court concluded that the trading patterns identified by the Plaintiffs were
3
evidence of parallel conduct consistent with a conspiracy. Id. at 559. Plaintiffs also alleged
“plus factors”—facts that tend to show that parallel conduct was the result of an unlawful
conspiracy rather than individual economically-rational decisions. Id. The structure of the
Silver Fixing presented an opportunity for collusion: the trading volume spikes identified by
Plaintiffs appeared to anticipate the Fix Price, whereas an efficient market would respond to the
Fix Price after it was announced; and, given the strikingly consistent below-market prices quoted
by the Defendants, it appears likely that on at least some occasions, individual Fixing Banks
acted against their own self-interest. Id. at 561-62. The Court found that the same allegations
stated a claim for manipulation under the Commodities Exchange Act (the “CEA”), 7 U.S.C. § 1
et seq. See id. at 565.
The Court also concluded that Plaintiffs had adequately alleged that they had “antitrust
standing.” Id. at 552. Plaintiffs allege that they were injured by the Fixing Banks’ conspiracy
because they sold silver-denominated assets at artificially low prices caused by the Fixing
Banks’ alleged manipulation of the Silver Fixing. Id. at 551. Although the Silver Fixing itself
can be distinguished from the markets for physical silver and silver-denominated assets, the
Silver Fixing and the silver markets are “inextricably intertwined.” Moreover, the Court
concluded that Plaintiffs were “efficient enforcers” because they sold silver investments on days
the Fixing Banks allegedly manipulated the Silver Fixing. Id. at 555. Even if Plaintiffs did not
deal directly with the Fixing Banks, the nature of the Defendants’ alleged manipulation was
market-wide and therefore had a sufficiently direct impact (at the motion to dismiss stage) on
Plaintiffs’ trades to provide standing. Id. By contrast, Plaintiffs made only limited allegations
against UBS, which was not a part of the Silver Fixing and therefore did not have access to the
same information. Id. at 575.
4
On June 8, 2017, the Court granted leave to amend and file the Third Amended
Complaint. See Dkt. 253 (“Silver II”). The TAC alleges a much broader conspiracy to
manipulate the markets for physical silver and silver-denominated assets. According to
Plaintiffs, Defendants’ “comprehensive strategy” has three elements.1 The first element is the
Silver Fixing scheme described above and addressed at length in Silver I. Relying on chat
messages between traders at Deutsche Bank and the other defendants (the “Deutsche Bank
Cooperation Materials”), the TAC also alleges a scheme to manipulate the “bid-ask” spread in
the market for physical silver and a scheme to manipulate the silver markets through coordinated
trading and information sharing.2 The TAC also added as defendants a handful of banks that
were not involved in the Silver Fixing: Barclays Bank PLC (“Barclays”), BNP Paribas Fortis
S.A./N.V. (“BNP Paribas”), Standard Chartered Bank (“Standard Chartered”), and Bank of
America Corporation and its subsidiary unit Merrill Lynch, Pierce, Fenner & Smith Inc.
(together, “BAML”) (collectively, the “New Defendants”).
One of the means allegedly used by the Non-Fixing Banks to profit from their
manipulation of the silver markets was manipulation of bid-ask spreads in the market for
physical silver. Plaintiffs allege occasions on which traders at Deutsche Bank and UBS
discussed how “wide” they would quote prices for 500,000 ounces of silver, settling on a spread
of 10 cents. TAC ¶ 230; see also TAC ¶¶ 231 (comparing spreads for different quantities of
silver), 240 (“if they call me in 1 lac [100,000 ounces of silver] I will quote 7-8 cents”). Traders
1
Plaintiffs describe the “comprehensive strategy” in five parts. See Opp’n (Dkt. 336 at 4-11). The
difference between three elements and five parts is not substantive.
2
The SAC also alleged improper trading and manipulation of bid-ask spreads. But the SAC alleged that the
Fixing Banks and UBS used manipulative trading tactics to profit from their foreknowledge of the Silver Fixing and
as means to conceal their manipulation of the Fix Price. The TAC alleges manipulative trading in the silver markets
more generally.
5
at Barclays, BNP Paribas, HSBC, and BAML are alleged to have engaged in similar discussions
with traders at Deutsche Bank. See TAC ¶¶ 232-43. For example, on July 4, 2008, in a
conversation with a trader at Barclays, a London-based Deutsche Bank trader said, “just be
wide.” TAC ¶ 239; see also TAC ¶ 240 (UBS trader told trader at Deutsche Bank “just quote
wider”). Many of the chats involve a single trader at Deutsche Bank, who communicated with
individual traders at each of the Non-Fixing Banks and was aware that the information he shared
was proprietary and could be used to gain an advantage over other market participants. See TAC
¶ 238 (“[UBS]: 10 cents is ridiculous.” “[Deutsche Bank]: u shudnt have told me
hahahaa[sic]hahahaha :D [smiley face].”). As the TAC explains, “wider spreads generated
increased profits from Defendants’ illegitimate market making activities at the expense of
Plaintiffs and the Class by removing price competition and requiring that market participants pay
an artificial price set by the cartel.” TAC ¶ 243.
The TAC also alleges collusion in the silver markets by traders at each of the Non-Fixing
Banks. Numerous chats between a trader at UBS and a trader at Deutsche Bank describe efforts
to coordinate positions, TAC ¶¶ 253, 279; to time coordinated trades for maximum market
impact, TAC ¶ 252 (“if we are correct and do it together, we screw other people harder”); and to
employ manipulative techniques artificially to push the price of silver-denominated assets up or
down, TAC ¶¶ 256-57, 259 (the “blade” and the “muscle”), 264 (“sniping”). Several of the chats
between traders at UBS and Deutsche Bank refer to collusion with traders at other banks. For
example, on March 31, 2011, a UBS trader shared a stop-loss position with Deutsche Bank and
said “in one hour im gonna call reinforcement,” i.e., another trader to help move the market price
and trigger the stop-loss order. TAC ¶ 251. On June 8, 2011, the same UBS trader told the same
Deutsche Bank trader that “we need to grow our mafia a lil get a third position involved,” to
6
which the Deutsche Bank trader responded, “ok calling barx.” TAC ¶ 250. On another occasion,
the same Deutsche Bank trader added the UBS trader to a chat with traders at HSBC and
Barclays, to which the UBS trader responded, “wow this is going to be the mother of all chats.”
TAC ¶ 274; see also TAC ¶ 280 (describing information possibly learned from discussions with
Bank of Nova Scotia).
Traders at Barclays also shared information with Deutsche Bank. In addition to sharing
information regarding bid-ask spreads, see TAC ¶ 233, a Barclays trader discussed another
bank’s attempt to “spoof” the silver markets on July 4, 2008. TAC ¶ 263; see also TAC ¶ 264
(Deutsche Bank and Barclays discussed “sniping”). On other occasions, traders at Barclays and
Deutsche Bank compared positions and coordinated purchases. TAC ¶¶ 291-96. In one chat, a
Barclays trader, referring to himself and a trader at Deutsche Bank, said “we are one team one
dream.” TAC ¶ 295. Chats between Deutsche Bank and UBS also reference collusion with
traders at Barclays. See TAC ¶¶ 250, 274.
The Deutsche Bank Cooperation Materials also include messages between a trader at
Deutsche Bank and traders at BNP Paribas. Several chats describe real-time sharing of market
positions and conditions including bid-ask spreads quoted by BNP Paribas and Deutsche Bank’s
position heading into the Silver Fixing. TAC ¶¶ 236, 298-99, 306-07. Two of the chats between
Deutsche Bank and BNP Paribas reference collusive trading techniques. See TAC ¶¶ 300 (BNP
Paribas trader described taking the “bulldozer” out on a prior occasion – potentially a reference
to triggering stop-loss orders), 310 (BNP Paribas trader suggested to Deutsche Bank trader that
they go “smash” the Silver Fixing).
A trader at Standard Chartered (and formerly of HSBC) also shared proprietary
information with a trader at Deutsche Bank. The TAC includes only three chat messages
7
involving Standard Chartered, but those chats include sharing of current trading positions, TAC
¶¶ 286-88, 290, and Deutsche Bank’s position in the Silver Fixing, TAC ¶ 289.
Finally, the TAC alleges six conversations between Deutsche Bank and BAML. One of
the chats includes an exchange of information regarding bid-ask spreads. TAC ¶ 301. Deutsche
Bank and BAML also shared information about the price level of stop-loss orders in the market,
TAC ¶¶ 301-02, and their current positions in silver-denominated derivatives, TAC ¶ 303.3
The Commodity Futures Trading Commission (the “CFTC”) and Department of Justice
have recently undertaken enforcement actions directly relevant to Plaintiffs’ claims against the
Non-Fixing Banks. On January 29, 2018, the CFTC announced a settlement with UBS to resolve
allegations that UBS traders “spoofed” the markets for precious metals and collaborated with
traders at another financial institution to trigger stop-loss orders. See Dkt. 344 Ex. 1 (“UBS
CFTC Order”). The CFTC consent order references specific instances of manipulation in the
silver markets, including the COMEX futures market. See UBS CFTC Order at 3-5. UBS
agreed to pay a $15 million monetary penalty to the CFTC. UBS CFTC Order at 11. Deutsche
Bank settled similar claims with the CFTC on the same day for $30 million. See Dkt. 344 Ex.2
at 3-7, 13. The CFTC has also initiated civil proceedings against three individual traders at
Deutsche Bank and UBS for alleged spoofing in the COMEX futures markets between 2008 and
2013.4 Dkts. 344 Exs.4, 5. Meanwhile, the Department of Justice has charged two BAML
traders with commodities fraud (among other things) in connection with alleged spoofing in the
3
The chat messages do not make clear which silver-denominated financial instruments were the subject of
the Non-Fixing Banks’ manipulation. Some of the messages clearly discuss physical silver. Others likely refer to
silver-denominated derivatives, but it is not obvious which derivatives or on what market they were traded.
4
The United States Department of Justice initiated criminal proceedings against the same traders in the
District of Connecticut and the Northern District of Illinois. The trader charged in Connecticut has since been
acquitted. See United States v. Andre Flotron, No. 17-Cr-220 (JAM) (D. Conn.).
8
precious metals futures markets, including the COMEX silver futures market. See Dkt. 344 Ex.6
(the “BAML Complaint”).
Plaintiffs are individuals and entities that transacted in physical silver and silverdenominated financial instruments during the class period. There are many silver-based
derivatives, but Plaintiffs allege they traded in physical silver or silver bullion; Chicago Board of
Trade (“CBOT”) silver futures; COMEX silver futures; COMEX “miNY” silver futures; New
York Stock Exchange LIFFE mini silver futures; and CBOT “mini” silver futures. Appendix D
to the TAC includes a list of days on which the price of silver was allegedly affected by
Defendants’ manipulative conduct on which Plaintiffs traded. The list in Appendix D does not
specify whether Plaintiffs’ alleged injury was the result of manipulation of the Silver Fixing,
manipulation of bid-ask spreads for physical silver, or manipulative trading. The TAC also does
not identify the counterparties to Plaintiffs’ transactions. It is unclear whether any of the
Plaintiffs dealt directly with any of the Defendants—much less dealt with a Defendant in an
allegedly manipulated transaction or in the immediate wake of a manipulated transaction.
The Non-Fixing Banks have moved to dismiss the TAC. They argue that the TAC’s
allegations of a “comprehensive” conspiracy among the Fixing Banks and Non-Fixing Banks are
not plausible. The connection between an agreement to depress the Fix Price and informationsharing and collusion in the silver markets is not clear. Because of the Fixing Banks’ complete
control over the Silver Fixing, other conspirators and collusive trading were unnecessary to profit
from foreknowledge of the Silver Fixing. Joint Mem. (Dkt. 303) at 9-10. None of the chat
messages reference an agreement with the Non-Fixing Banks to fix the Silver Fixing. Joint
Mem. at 11-12. As the Non-Fixing Banks point out, they are conspicuously absent from the
TAC’s allegations of parallel and below-market trading: “Of the roughly 850 trading days on
9
which Plaintiffs allege the occurrence of spot price manipulation, Plaintiffs assert that two of the
Non-Fixing Banks collectively submitted lower quotes around the Silver Fixing on just six
purportedly illustrative days (representing less than 1% of the sample). Joint Mem. at 14.
The Non-Fixing Banks also argue that Plaintiffs lack antitrust standing as to the NonFixing Banks. Because the Non-Fixing Banks’ involvement in the conspiracy differs in
important respects from the Fixing Banks, the Non-Fixing Banks contend that they are
differently situated. They argue that because no Plaintiff alleges that he traded with the NonFixing Banks, there is only an indirect connection between Plaintiffs’ trades and the market
manipulation identified in the Deutsche Bank Cooperation Materials. Joint Mem. at 25. For the
same reason, they assert that Plaintiffs’ injuries are attenuated from the alleged collusion and are
highly speculative. Joint Mem. at 26-27.
With respect to Plaintiffs’ claims pursuant to the CEA, the Non-Fixing Banks argue that
Plaintiffs’ claims are untimely because Plaintiffs were on notice of possible manipulation of the
silver markets more than two years before they sought leave to amend in November 2017.
Assuming Plaintiffs’ claims are not time-barred, the Non-Fixing Banks contend in the alternative
that Plaintiffs’ allegations are insufficient because they do not adequately allege that the NonFixing Banks intended to manipulate the silver futures markets or that they were successful in
doing so. The Non-Fixing Banks also contend that Plaintiffs’ CEA claims are impermissibly
extraterritorial because there is no alleged impact on a domestic market from the Non-Fixing
Banks’ manipulation.
Failing these defenses, certain of the Non-Fixing Banks contend the Court lacks personal
jurisdiction over them. UBS, Standard Chartered, BNP Paribas, and Barclays argue that
Plaintiffs do not allege their involvement in any in-forum, suit-related misconduct.
10
DISCUSSION
In evaluating a motion to dismiss, the Court must “‘accept all factual allegations in the
complaint as true and draw all reasonable inferences in favor of the plaintiff.’” Meyer v.
JinkoSolar Holdings Co., 761 F.3d 245, 249 (2d Cir. 2014) (quoting N.J. Carpenters Health
Fund v. Royal Bank of Scotland Grp., PLC, 709 F.3d 109, 119 (2d Cir. 2013)) (alterations
omitted). Nonetheless, in order to survive a motion to dismiss, “a complaint must contain
sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Plausibility” is not certainty. Iqbal does not require the complaint to allege “facts which can
have no conceivable other explanation, no matter how improbable that explanation may be.”
Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 360 (2d Cir. 2013). But “[f]actual allegations
must be enough to raise a right to relief above the speculative level,” Twombly, 550 U.S. at 555,
and “[courts] ‘are not bound to accept as true a legal conclusion couched as a factual
allegation,’” Brown v. Daikin Am. Inc., 756 F.3d 219, 225 (2d Cir. 2014) (quoting Twombly, 550
U.S. at 555) (other internal quotations marks and citations omitted).
I.
Sherman Act Claims5
Plaintiffs bring claims for price fixing, bid rigging, and conspiracy to restrain trade under
Section 1 of the Sherman Act. Horizontal price fixing is, of course, per se illegal. United States
v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-24 (1940). Claims for bid rigging, on the other
5
Under the circumstances, the Court exercises its discretion to address the Non-Fixing Banks’ motion to
dismiss for failure to state a claim before addressing personal jurisdiction. See Sullivan v. Barclays PLC, No. 13CV-2811 (PKC), 2017 WL 685570, at *11 (S.D.N.Y. Feb. 21, 2017) (“In cases such as this one with multiple
defendants—over some of whom the court indisputably has personal jurisdiction—in which all defendants
collectively challenge the legal sufficiency of the plaintiff's cause of action, we may address first the facial challenge
to the underlying cause of action and, if we dismiss the claim in its entirety, decline to address the personal
jurisdictional claims made by some defendants.” (quoting Chevron Corp. v. Naranjo, 667 F.3d 232, 247 n.17 (2d
Cir. 2012))). Because Plaintiffs’ claims fail on their merits, the Court need not address personal jurisdiction.
11
hand, typically involve competitors conspiring to raise prices for purchasers—often, but not
always, governmental entities—who acquire products or services by soliciting competing bids.
See, e.g., Gatt Commcn’s, Inc. v. PMC Assocs., LLC, 711 F.3d 68, 72-74 (2d Cir. 2013); State of
N.Y. v. Hendrickson Bros., 840 F.2d 1065 (2d Cir. 1988). With regard to unlawful restraints of
trade, “[b]ecause [Section] 1 of the Sherman Act does not prohibit [all] unreasonable restraints of
trade . . . but only restraints effected by a contract, combination, or conspiracy, . . . [t]he crucial
question is whether the challenged anticompetitive conduct stem[s] from independent decision or
from an agreement, tacit or express.” Twombly, 550 U.S. at 553 (alterations in the original)
(internal quotations and citations omitted). Regardless of whether Plaintiffs’ allegations are
evaluated in terms of price fixing, bid rigging or an unlawful restraint of trade, an unlawful
agreement must be pleaded with respect to each antitrust claim brought under Section 1. See,
e.g., In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (“To survive a motion to
dismiss . . . a complaint must contain enough factual matter . . . to suggest that an agreement . . .
was made.”)) (internal citations and quotations omitted).
A. Allegations of an Overarching Agreement Involving the Silver Fixing
To allege an unlawful agreement, Plaintiffs must plead either direct evidence (such as a
recorded phone call or email in which competitors agreed to fix prices) or “circumstantial facts
supporting the inference that a conspiracy existed.” Mayor & City Council of Baltimore v.
Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013) (emphasis in original). Because conspiracies
“nearly always must be proven through inferences that may fairly be drawn from the behavior of
the alleged conspirators,” the fact that Plaintiffs have no direct evidence does not mean there was
no conspiracy. In re Foreign Exch. Benchmark Rates Antitrust Litig., 74 F. Supp. 3d 581, 591
(S.D.N.Y. 2015) (“FOREX I”) (quoting Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d
12
162, 183 (2d Cir. 2012)). At the pleading stage, Plaintiffs “need not show that [their] allegations
suggesting an agreement are more likely than not true or that they rule out the possibility of
independent action . . . .” Gelboim v. Bank of Am. Corp., 823 F.3d 759, 781 (2d Cir. 2016)
(quoting Anderson News, 680 F.3d at 184). Instead, “‘a well-pleaded complaint may proceed
even if . . . actual proof of those facts is improbable, and . . . a recovery is very remote and
unlikely’ as long as the complaint presents a plausible interpretation of wrongdoing.” FOREX I,
74 F. Supp. 3d at 591 (quoting Twombly, 550 U.S. at 556) (emphasis in original); see also
Gelboim, 823 F.3d at 781 (“At the pleading stage, a complaint claiming conspiracy, to be
plausible, must plead ‘enough factual matter (taken as true) to suggest that an agreement was
made . . . .’” (quoting Anderson News, 680 F.3d at 184)).
For the reasons discussed more fully below, the Court does not find Plaintiffs’ allegations
of a “comprehensive” conspiracy to be plausible. What Plaintiffs present as components of a
single agreement appear to be unrelated, internally inconsistent efforts to manipulate the silver
markets episodically. See Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG, 277 F.
Supp. 3d 521, 546 n.11 (S.D.N.Y. 2017) (“CHF LIBOR”) (rejecting inference of an overarching
conspiracy to manipulate markets in Swiss-denominated LIBOR because “a group of defendants
could have agreed to fix bid-ask spreads regardless of the CHF LIBOR rate, and vice versa, and
there is no indication that the two conspiracies were part of one interwoven plot, as opposed to
two separate sets of misconduct allegedly committed by the same entities.”); In re Zinc Antitrust
Litig., 155 F. Supp. 3d 337, 372-73 (S.D.N.Y. 2016) (rejecting inference of an overarching
conspiracy where there was not a clear connection between various forms of manipulation).
Even though the TAC plausibly alleges that the Fixing Banks conspired to depress the Fix Price,
it does not explain why the Non-Fixing Banks, which are competitors and counterparties, would
13
be in on the agreement. The coordinated trading alleged in the TAC lacks a connection to
suppression of the Fix Price and, in fact, could have made it more difficult to profit from
foreknowledge of the Fix Price.
The TAC does not include any direct evidence of an agreement between the Non-Fixing
Banks and the Fixing Banks involving the Silver Fix. The chat messages that reference the
Silver Fixing do not reference or suggest an overarching scheme to depress the Silver Fix and
many are inconsistent with Plaintiffs’ theory that the Non-Fixing Banks had foreknowledge of
the Fix Price. For example, chats between Deutsche Bank and BNP Paribas appear to involve
sharing by Deutsche Bank of its anticipated position heading into the Silver Fixing. TAC ¶¶
297-98, 310. The information in these messages could have been used by BNP Paribas to predict
the direction of the Silver Fixing, but the messages do not suggest that BNP Paribas was part of
an agreement to manipulate the Fix Price, and the fact that this information was worth sharing
suggests that the result of the Silver Fixing was otherwise uncertain to BNP Paribas. Other chats
reference apparently unilateral or bilateral attempts to manipulate the Silver Fixing. See TAC ¶¶
307 ([Deutsche Bank]: “HE SPOOFED IT TO BUY IT AND I THINK HE JUST SOLD IT TO
BUY IT . . . JUST LIKE THEM TO BID IT UP BEFORE THE FIX THEN GO IN AS A
SELLER . . . .”), 308 ([UBS]: “oh ok did I tell u I saw a 300k loss on the fixing before too . . .
started pushing too early lol”), 310 ([Deutsche Bank]: “I got the fix in 3 minutes” [BNP Paribas]:
“I’m bearish . . . . Let’s go and smash it together”), 311 ([Deutsche Bank]: “well you told me too
but i told no one u just said you sold on fix” [UBS]: “we smashed it good”), 322. A few of the
chats describe the results of the Silver Fixing, essentially after-action reports, and suggest that
the chat participants did not have foreknowledge of the Fix Price. See TAC ¶ 289 ([Standard
Chartered]: “what was that all aboyt” [Deutsche Bank]: “silver fix?” [Standard Chartered]:
14
“yeah” [Deutsche Bank]: “I had 2 m to sell no one wanted it.”). The fact that the Non-Fixing
Banks agreed, on occasion, to “smash” or “push” the Silver Fixing is inconsistent with being
members of a broader conspiracy to depress the Fix Price.
It is also hard to understand why the Fixing Banks, major market-makers with their own
trading operations and collective control over the Silver Fixing, would involve numerous other
market makers in their scheme. In re Zinc Antitrust Litig., 155 F. Supp. 3d at 372 (finding that
the fact that defendant and affiliated entities controlled a significant market share made it less
likely they would involve non-affiliated entities in an anticompetitive scheme). This is
particularly true because in the zero-sum world of commodities trading, the other banks were
potentially counterparties at whose expense the Fixing Banks would have sought to profit.
The manipulative techniques described in the Deutsche Bank Cooperation Materials also
lack a connection to Plaintiffs’ theory that the Fixing Banks conspired to depress the Fix Price.
Coordinated trading could further the Fixing Banks’ alleged conspiracy by masking otherwise
suspicious changes in the price of silver-denominated assets. But the chats are not direct or
circumstantial evidence of this theory. Because Plaintiffs did not include the time of the
messages on which the TAC relies, it is impossible to tell from the TAC whether the
manipulative trades being discussed were timed to conceal a reversion in the Fix Price.6 The
6
Exhibits to the Defendants’ motions include time stamps for the chats included in the TAC and the
locations of the traders involved. The time stamps reveal that many of the chat messages occurred when the London
markets were closed, which suggests that they were not a part of an effort to manipulate the Silver Fixing.
Notwithstanding Plaintiffs’ obvious and annoying attempt to hide the ball by omitting this information, the Court
may consider the time stamps (and the locations of the traders involved in the chats) because the chat messages are
incorporated into the TAC.
By cross-referencing this information to Appendix D to the TAC it is possible to determine that the
Plaintiffs traded on certain of the days on which the chat messages were sent. But this information is of limited
value because Plaintiffs do not connect the chat messages to specific incidents of market manipulation in the silver
markets (much less to the markets on which Plaintiffs traded), and they do not explain how that hypothetical market
manipulation would have had an impact on Plaintiffs’ trades.
15
chats describe tactics that could move prices up or down and therefore are not necessarily
consistent with a conspiracy, the goal of which was to suppress prices. See, e.g., TAC ¶¶ 257-59
(discussing the “muscle” and “blade” strategies, which could provide “artificial support for silver
prices” and recommending that a trader hold-off on manipulation because “its gonna go fast like
rollercoaster going up”). “Spoofing,”—placing and then canceling orders to give an appearance
of demand at a given price—can create artificial price pressure in either direction. See TAC ¶
261 (spoofing causes artificial prices “either above or below where the market was trading”).
“Pushing,” “smashing,” and “hammering” silver prices cause prices to fall (or to increase, TAC
¶¶ 307, 312), but are profitable because a trader “pushing” the market can trade at an artificial
price, knowing that prices will revert to normal post-manipulation. See TAC ¶¶ 307-09, 320-21
(Deutsche Bank and UBS conspired to “push silver prices down through stop-loss orders to
generate illegitimate profits by trading in advance of the ‘wave’ created when prices shot back
up.”). The profitability of those tactics is dependent on a reversion in prices, which is
inconsistent with a conspiracy persistently to depress silver prices.
Where direct evidence is lacking, an antitrust conspiracy may be plausibly alleged
through circumstantial evidence. Circumstantial evidence includes parallel behavior and socalled “plus factors.” See Mayor & City Council of Balt., 709 F.3d at 136. “[P]lus factors
include: (1) a common motive to conspire; (2) evidence that shows that the parallel acts were
against the apparent individual economic self-interest of the alleged conspirators; and (3)
evidence of a high level of interfirm communications.” Gelboim, 823 F.3d at 781 (quoting
Mayor & City Council of Balt., 709 F.3d at 136) (internal quotation marks and additional
citations omitted). In Silver I, the Court concluded that Plaintiffs’ econometric analysis of the
silver markets around the time of the Silver Fixing, along with evidence of motive and a
16
readymade forum for collusion, plausibly alleged a conspiracy among the Fixing Banks to
depress the Fix Price. 213 F. Supp. 3d at 561-62. The Court finds that the TAC does not include
similar facts as to the New Defendants.
Plaintiffs do not present an econometric analysis of quotes from the New Defendants to
tie them to the alleged conspiracy to suppress the Fix Price. Plaintiffs identified approximately
850 days on which they allege there was manipulation of the spot price of silver around the time
of the Silver Fixing. See TAC App’x D. Reversions in the price of silver shortly before and
during the Silver Fixing are circumstantial evidence of a conspiracy to depress the Fix Price
because they indicate either foreknowledge of the direction of the Fix Price or an attempt to
conceal the effect of manipulation of the Fix Price. See Silver I, 213 F. Supp. 3d at 561-62. The
TAC does not link the New Defendants to this pattern of below market quotes. On six days—out
of 850 identified in the TAC—one or more of the Non-Fixing Banks submitted below-market
quotes leading up to the Silver Fixing. One does not need to conduct sophisticated statistical
analyses to conclude that such evidence is too slim a reed from which the Court could infer
foreknowledge of the Fix Price. The New Defendants are not included in Plaintiffs’ analysis of
bid-ask spreads before and during the Silver Fixing. See TAC ¶¶ 223-229. As the New
Defendants point out, the thesis of this analysis is that “[i]n stark contrast to the rest of the
market the Fixing [Banks] and UBS never narrow[ed] their spread in response to the new
information provided by the Silver Fix[ing].” Joint Mem. at 16 (quoting TAC ¶ 228) (emphasis
in original). Implicitly, Plaintiffs concede that the New Defendants are a part of “the rest of the
market”, and that their bid-ask spreads moved with the market in response to the Fix Price.
Plaintiffs’ allegations of unilateral and bilateral manipulative trading are evidence of
collusion in the silver markets but are of limited value in suggesting a conspiracy to manipulate
17
the Silver Fixing. Arguing to the contrary, Plaintiffs rely on In re High-Tech Employee Antitrust
Litigation, 856 F. Supp. 2d 1103 (N.D. Cal. 2012). In that case, plaintiffs alleged an overarching
agreement not to compete for employees based on allegations that suggested the existence of six
bilateral, but “virtually identical,” agreements. Id. at 1119-20. In a boycott or refusal-to-deal
case, like High-Tech Employee, bilateral agreements can be persuasive evidence of an
overarching conspiracy because each agreement is economically rational only if other market
participants are also involved. In other words, each bilateral agreement or unilateral action
would be against the defendants’ self-interest unless all of the participants were acting in concert.
See, e.g., Grasso Enters., LLC v. Express Scripts, Inc., 2017 WL 3654434, at *5 (E.D. Mo. 2017)
(individual refusal to deal only economically rational if a part of a broader conspiracy). In
contrast, bilateral coordinated trading such as “smashing” and “pushing” the markets for silverdenominated assets would be profitable to the traders involved regardless of whether the conduct
was connected to a broader agreement to manipulate the Fix Price. See Sullivan, 2017 WL
685570, at *25 (recognizing that “horizontal activity to fix the price of Euribor-based derivatives
on a transaction-by-transaction basis” does not “overlap with the fixing of the Euribor”
benchmark rate).
Because manipulative trading could cause an increase in price—as Plaintiffs
acknowledge—it is also possible that the manipulative trading alleged in the TAC would work at
cross-purposes with a conspiracy to suppress the Fix Price. Cf. CHF LIBOR, 277 F. Supp. 3d at
555 (“[I]t is harder to infer a conspiracy from individual acts of trader-based manipulation
because large financial institutions are both buyers and sellers of derivative products, and thus
any changes may well offset each other.”). The chat messages show that the Non-Fixing Banks
used similar methods to manipulate the silver markets—potentially evidence of a broader
18
agreement, see In re Interest Rate Swaps Antitrust Litig., 261 F. Supp. 3d 430, 472-74 (S.D.N.Y.
2017)—but those methods bear little resemblance to Plaintiffs’ theory that the Fixing Banks used
the daily fixing call to agree on an artificially low Fix Price.7
Plaintiffs also rely heavily on In re Foreign Exchange Benchmark Rates Antitrust
Litigation, 2016 WL 5108131 (S.D.N.Y. 2016) (“FOREX III”). FOREX III also involved
allegations of a broader conspiracy based on evidence of bilateral and group chat messages
among traders, but it differs in critical respects. In FOREX I, the conspirators were alleged to
have manipulated benchmark rates such as the WM/Reuters Closing Spot Rates through
information sharing and coordinated trading in the foreign exchange markets in advance of the
benchmark measurement. See FOREX III, 2016 WL 5108131, at *3. Because the conspirators
in FOREX I were not a part of the benchmark-fixing process, they depended on coordinated
trading and information sharing to accomplish their goal of manipulating the benchmark. Id.
Given the means available to the conspirators, chat messages showing information sharing and
coordinated trading among the defendants were highly relevant to plaintiffs’ benchmark
manipulation theory. There is no similar, close connection between manipulative trading, as
evidenced in the Deutsche Bank Cooperation Materials included in the TAC, and the Silver
7
To the extent Plaintiffs intend to argue that they have plausibly alleged parallel conduct and plus factors as
to UBS, the Court disagrees. The Court granted UBS’s motion to dismiss the SAC because Plaintiffs did not allege
that UBS had any role in the Silver Fixing. See Silver I, 213 F. Supp. 3d at 575-76. The TAC includes chat
messages between traders at UBS and Deutsche Bank suggesting that UBS and Deutsche Bank coordinated attempts
to manipulate the markets for unspecified silver-denominated assets. The chats are some evidence of a conspiracy
to manipulate prices because they evidence a high degree of intrafirm communication and a willingness to collude
and use manipulative trading techniques in the subject market or a related market. Nonetheless, they are not so
probative as to make UBS’s involvement in a conspiracy to manipulate the Fix Price plausible. To the extent they
reference the Silver Fixing, the chats describe unilateral manipulation. See TAC ¶¶ 308, 311. Unilateral attempts to
manipulate the Silver Fixing are inconsistent with an overarching conspiracy among the Fixing Banks and UBS to
depress the Fix Price. The other chats involving UBS describe manipulation of the markets for silver-denominated
assets more generally. But, as the Non-Fixing Banks have noted, these chats involve a UBS trader stationed in
Singapore and did not take place during London trading hours, making it highly unlikely they related to the Silver
Fix.
19
Fixing process. The Silver Fixing (and the similar gold fixings) is sui generis insofar as a limited
number of market participants exercised control over the fixing process through a daily,
unrecorded conference call. Accordingly, while the Court finds FOREX III relevant to
determining whether a conspiracy existed among the Non-Fixing Banks, it does not suggest that
Plaintiffs have plausibly alleged a comprehensive scheme among the Fixing Banks and NonFixing Banks to manipulate the Fix Price.
B. Allegations of an Agreement among the Non-Fixing Banks
While the TAC does not allege an “overarching” conspiracy among the Fixing Banks and
Non-Fixing Banks, the Court finds that the chat messages contained in the TAC plausibly allege
a conspiracy among the Non-Fixing Banks (and Deutsche Bank) to manipulate the markets for
silver and silver-denominated financial assets opportunistically and to fix bid-ask spreads in the
market for physical silver. Cf. In re Zinc Antitrust Litig., 155 F. Supp. 3d at 368 (recognizing
that allegations in antitrust complaint may allege multiple different, but overlapping
conspiracies).
The chat messages included in the TAC are direct evidence of an anticompetitive
agreement to manipulate the silver markets.8 See FOREX I, 74 F. Supp. 3d at 591 (chat rooms
and instant messages used to share pricing information and trading positions are direct evidence
of an anticompetitive agreement). The Court is not persuaded by the Non-Fixing Banks’
8
The chat messages, as reproduced in the TAC, do not specify which silver-denominated instruments were
to be manipulated. Many of the chats use terminology that is specific to the physical silver markets. See, e.g., TAC
¶¶ 7, 230-233. Others appear to reference silver futures but do not specify whether they involve COMEX silver
futures, CBOT silver futures, or NYSE silver futures. Nonetheless, it is plausible that the manipulation involved the
silver futures markets in which Plaintiffs traded: the CFTC’s settlements with Deutsche Bank and UBS describe
manipulation of COMEX futures, see Dkt 344 Ex. 1 at 3, Ex. 2 at 3; the CFTC’s complaints against individual
traders at Deutsche Bank and UBS also refer to manipulation of COMEX futures contracts, Dkt. 344 Exs. 4, 5; and
the Department of Justice’s complaint against two traders at BAML also describes manipulation of COMEX futures.
See Dkt. 344 Ex. 6.
20
argument that these chat messages involve mere ex post information sharing or “inapposite”
bilateral communications. Joint Reply Mem. (Dkt. 338) at 2. The chat messages cited in the
TAC involve exchanges of current pricing information by horizontal competitors, see TAC ¶¶
230-31, 236, 287-88, 301, 303, 306; sharing of real-time order flow information, see TAC ¶¶
286, 289, 291-96, 298-99, 307; and coordinated use of manipulative trading strategies such as the
“blade” and “muscle” and trading intended to trigger stop loss orders, see TAC ¶¶ 256-59, 264,
310. These are paradigmatic examples of communications relevant to a horizontal price-fixing
scheme.9 See FOREX I, 74 F. Supp. 3d at 591; Sullivan, 2017 WL 685570, at *23–24
(identifying bilateral chat messages, primarily involving a trader at Deutsche Bank, as evidence
of a broader conspiracy to manipulate the Euribor benchmark); CHF LIBOR, 277 F. Supp. 3d at
553, 556 (concluding that chat messages were adequate to state conspiracy claim against the
bank quoted in the chat messages); In re Libor-Based Fin. Instruments Antitrust Litig., 2015 WL
4634541, at *44 (S.D.N.Y. Aug. 4, 2015) (“LIBOR IV”) (sustaining complaint where Plaintiff
identified “sporadic” examples of rate manipulation); cf. Todd v. Exxon Corp., 275 F.3d 191,
211-12 (2d Cir. 2001) (exchange of specific and current information related to prices is probative
of anticompetitive behavior in a “data-exchange” case).
9
A comparison to the chat messages in CHF LIBOR is helpful. In that case, Plaintiffs’ complaint relied
primarily on chat messages included in government reports. There were “multiple[,] specific” messages involving
one defendant, Royal Bank of Scotland (“RBS”), and an unidentified other bank, but only one chat involving the
other defendants. Id. at 540-42; id at 553 (“the specific allegations of inter-defendant collusion consist of
communications between RBS and an unidentified bank in 2008 and 2009 and a single request from BlueCrest to
Deutsche Bank AG for a single tenor on a single day that may never have been responded to, let alone acted upon.”).
Judge Stein concluded that the complaint plausibly alleged a conspiracy against RBS, but not against any of the
other defendants. By contrast, the TAC quotes chat messages involving each Non-Fixing Defendant, on multiple
occasions, explicitly discussing market manipulation or sharing current pricing and order flow information. The
evidence produced by Plaintiffs is at least as strong as the evidence produced against RBS in CHF LIBOR and more
similar to the sustained complaint in FOREX I.
21
Several of the chat messages refer to other Defendants, suggesting that marketmanipulation was not limited to sporadic bilateral agreements. For example, a UBS trader told a
Deutsche Bank trader that they needed to “grow our mafia a lil” by getting a “third position
involved.” TAC ¶ 250. The Deutsche Bank trader responded by saying “ok calling barx
[Barclays]” and reported that the Barclays trader had agreed to participate in the manipulation.
TAC ¶ 250. The same traders participated in what one characterized as “the mother of all chats”
involving traders at HSBC and Barclays. TAC ¶ 274. Other chats plausibly support an inference
of a multilateral conspiracy. See TAC ¶ 251 (UBS trader told Deutsche Bank trader that “in one
hour im gonna call reinforcement”). A single London-based Deutsche Bank trader appears to
have played a clearinghouse role in the alleged conspiracy. This particular trader shared
proprietary information, discussed manipulative trading, and agreed to fix prices with traders at
each of the Non-Fixing Banks. See TAC ¶¶ 235-36, 238-39, 263, 288, 290, 297-306, 310. At
this stage, Plaintiffs “need not show that ‘the defendant knew the identities of all the other
conspirators,’” In re Interest Rate Swaps Antitrust Litig., 261 F. Supp. 3d at 482 (quoting United
States v. Huezo, 546 F.3d 174, 180 (2d Cir. 2008)), and it is plausible that the conspiracy
operated through one or more well-connected traders without the knowledge of the other
participants.
The CFTC’s settlements with UBS and Deutsche Bank, and the Department of Justice’s
prosecution of traders at Deutsche Bank and BAML are also evidence of a conspiracy. See
FrontPoint Asian Event Driven Fund, L.P. v. Citibank, N.A., No. 16-CV-5263 (AKH), 2017 WL
3600425, at *10 (S.D.N.Y. Aug. 18, 2017) (considering regulator’s findings of inappropriate
behavior directed at improperly-influenced benchmark rates as evidence of a conspiracy); see
22
also FOREX I, 74 F. Supp. 3d at 592 (relying in part on regulatory enforcement actions to find
plausible allegations of a conspiracy to fix benchmark rates).
The chat messages are especially strong direct evidence of an anticompetitive agreement
to quote artificially wide bid-ask spreads in the market for physical silver.10 Traders at Barclays,
HSBC, BNP Paribas, BAML, and UBS discussed bid-ask spreads with traders at Deutsche Bank.
See TAC ¶¶ 231-43. Several of these chats include explicit agreements—such as when traders at
Deutsche Bank and UBS agreed to quote a bid-ask spread of 10 cents on an order of 500,000
ounces of silver. See TAC ¶ 230. One Deutsche Bank trader repeatedly urged traders at the
other defendant banks to quote “wider,” i.e., more profitable spreads. See TAC ¶¶ 239-40. As
this trader forthrightly explained to a trader at UBS, “the price of liquidity is growing [and] u
have to pass it on to the custys [customers].” TAC ¶ 238. Although these chats do not reference
an agreement among the defendants, quoting artificially wide bid-ask spreads would not be
economically rational without a broader agreement involving a critical mass of market
participants. In this respect, the conspiracy alleged in the TAC is a traditional price-fixing
conspiracy: it is easier to increase prices to customers if a critical mass of market participants is
involved.
Defendants’ remaining arguments urge the Court to pick-and-choose between plausible
inferences. Relying on the dearth of multi-bank chat messages in the TAC, Defendants argue
that the Court should presume that any market-manipulation was bilateral and that there was no
overarching agreement. Joint Reply Mem. at 4-5. The cases cited by Defendants for this point
are summary judgment cases. See Dahl v. Bain Capital Partners, LLC, 937 F. Supp. 2d 119, 135
10
Plaintiffs have adduced no evidence of a conspiracy to fix bid-ask spreads in any other silver-related
market. To the extent they claim bid-ask spread manipulation in the markets for silver-denominated derivatives,
their claims are based purely on speculation, see CHF LIBOR, 277 F. Supp. 3d at 545, and are not plausible.
23
(D. Mass. 2013); In re K-Dur Antitrust Litig., No. 01-CV-1652 (SRC), 2016 WL 755623, at *2122 (D.N.J. Feb. 25, 2016). As discussed above, some of the chats reference other conspirators,
and it is plausible that the conspiracy worked through a hub of one or more central wrong-doers.
The involvement of other conspirators, providing additional “ammo,” was also economically
rational.11 The Court also rejects Defendants’ argument that because the chats do not
demonstrate “systemic inter-firm communications by high-level executives,” they are not
indicative of an antitrust conspiracy. Joint Reply Mem. at 6. In a market manipulation case such
as this, the traders at each bank are key. Whether these communications are sufficient to prove a
single, unified conspiracy is a question for summary judgment or trial. As Judge Schofield
explained in FOREX III, it is possible that bilateral or group chats were merely opportunistic
attempts at collusion—rather than a part of an overarching conspiracy—but it is also plausible
that the communications are evidence of a broader agreement. “Questions as to each
Defendant’s participation in the conspiracy and the conspiracy’s scope may be raised later in
litigation, but do not merit dismissal at this phase.” FOREX III, 2016 WL 5108131 at *4.
Finally, Defendants contend the chat messages show sharing of price and order information but
not market manipulation. The Court disagrees because many of the chat messages clearly
discuss market manipulation, see, e.g., TAC ¶¶ 257-259, 263-266, or involve information sharing
between horizontal competitors with no apparent purpose other than to coordinate positions, see,
e.g., TAC ¶¶ 230-237, 252-53. In any event, it is plausible to infer an anticompetitive agreement
11
It is possible, even likely, that some of the Defendants may have been on the other side of the market
manipulation discussed in the TAC. An agreement among two of the Defendants to “push” silver prices higher
could injure other Defendants betting that silver prices would fall. If true, the fact that some of the allegedly
anticompetitive conduct injured other Defendants may be a basis to argue that there was no overarching conspiracy.
See CHF LIBOR, 277 F. Supp. 3d at 556 (“With no consistent preference between a higher and lower CHF LIBOR
rate, plaintiffs fail to explain why it is plausible to think that defendants would consistently share a preference at any
given time, particularly over the course of a decade, and why one defendant’s interests might not be adverse to
another’s.”). It is also a reminder that there is no honor among thieves.
24
from apparently regular sharing of current price and order information between horizontal
competitors. See Gelboim, 823 F.3d at 781 (“‘The choice between two plausible inferences that
may be drawn from factual allegations is not a choice to be made by the court on a Rule 12(b)(6)
motion’”; an antitrust plaintiff “need not show that its allegations suggesting an agreement are
more likely than not true or that they rule out the possibility of independent action.”) (quoting
Anderson News, 680 F.3d at 184-85). To state the obvious, it is not rational for horizontal
competitors to share current pricing information absent the existence of an anticompetitive
agreement. See FOREX III, 2016 WL 5108131, at *4 (sharing of information “is against each
bank’s economic self-interest as a competitor absent collusion”).
In sum, the Court does not find Plaintiffs’ allegations of a single conspiracy among the
Fixing Banks and Non-Fixing Banks to manipulate the Silver Fixing to be plausible. That said,
the TAC plausibly alleges two conspiracies: Plaintiffs have plausibly alleged a conspiracy
involving the Fixing Banks to suppress the Fix Price through the daily fixing call. Plaintiffs have
also plausibly alleged a conspiracy among the Non-Fixing banks to collude in the silver markets
through market manipulation and information-sharing. Whether Plaintiffs would be able to
prove that the market manipulation alleged in the TAC was anything other than episodic and
bilateral collusion among traders is unknown, but they have plausibly alleged the existence of a
conspiracy.
Because Plaintiffs’ Sherman Act claim against the Non-Fixing Banks is plausible, the
Court must consider whether Plaintiffs have “antitrust standing” to assert such a claim.
25
C. Antitrust Standing
Section 4 of the Clayton Act establishes a private right of action to enforce Section 1 of
the Sherman Act. 15 U.S.C. § 15.12 Applying the Supreme Court’s decision in Associated
General Contractors v. California State Council of Carpenters, 459 U.S. 519 (1983) (“AGC”),
the Second Circuit has held that “a private antitrust plaintiff [must] plausibly [ ] allege (a) that it
suffered a special kind of antitrust injury, and (b) that it is a suitable plaintiff to pursue the
alleged antitrust violations and thus is an ‘efficient enforcer’ of the antitrust laws.” Gatt
Commcn’s, 711 F.3d at 76 (citations and internal quotations omitted). “‘Antitrust standing is a
threshold, pleading-stage inquiry . . . .’” Id. at 75 (quoting NicSand, Inc. v. 3M Co., 507 F.3d
442, 450 (6th Cir. 2007) (en banc)). Regardless of whether Plaintiffs have suffered an “antitrust
injury,” Plaintiffs lack antitrust standing as to the Non-Fixing Banks alleged conspiracy because
they are not “efficient enforcers.”
Efficient Enforcers
The Second Circuit has identified four factors to consider when determining whether a
particular plaintiff has standing as an “efficient enforcer” to seek damages under the antitrust
laws:
(1) whether the violation was a direct or remote cause of the injury; (2) whether
there is an identifiable class of other persons whose self-interest would normally
lead them to sue for the violation; (3) whether the injury was speculative; and
(4) whether there is a risk that other plaintiffs would be entitled to recover
duplicative damages or that damages would be difficult to apportion among
12
Section 4 of the Clayton Act provides:
[A]ny person who shall be injured in his business or property by reason of anything forbidden
in the antitrust laws may sue . . . in any district court of the United States in the district in which
the defendant resides or is found or has an agent, without respect to the amount in controversy,
and shall recover threefold the damages by him sustained, and the cost of suit, including a
reasonable attorney’s fee.
15 U.S.C. § 15(a).
26
possible victims of the antitrust injury. . . . Built into the analysis is an
assessment of the “chain of causation” between the violation and the injury.
Gelboim, 823 F.3d at 772 (citations omitted). “These factors are meant to guide a court in
exploring the fundamental issue of ‘whether the putative plaintiff is a proper party to perform the
office of a private attorney general and thereby vindicate the public interest in antitrust
enforcement.’” In re Platinum & Palladium Antitrust Litig., No. 14-CV-9391 (GHW), 2017 WL
1169626, at *20 (S.D.N.Y. Mar. 28, 2017) (quoting Gelboim, 823 F.3d at 780).
Since the Second Circuit’s decision in Gelboim, a critical mass of judges within this
district have concluded that plaintiffs who are not direct purchasers are not efficient enforcers in
a benchmark manipulation case.13 See In re LIBOR-Based Fin. Instruments Antitrust Litig., No.
11-MD-2262 (NRB), 2016 WL 7378980 at *16 (S.D.N.Y. Dec. 20, 2016) (“LIBOR VI”);
Sullivan, 2017 WL 685570, at *15; In re Platinum & Palladium Antitrust Litig., 2017 WL
1169626, at *22; CHF LIBOR, 277 F. Supp. 3d at 558. Plaintiffs who do not deal directly with
the defendants are referred to as “umbrella purchasers” or “umbrella plaintiffs.” See In re
Platinum & Palladium Antitrust Litig., 2017 WL 1169626, at *22. Umbrella purchasers are
potentially injured by price-fixing because price-fixing enables non-conspiring market
participants to charge supra-competitive prices. See Silver I, 213 F. Supp. 3d at 555 (“In the
typical umbrella liability case, plaintiffs’ injuries arise from a transaction with a non-conspiring
retailer who is able, but not required, to charge supra-competitive prices as the result of
defendants’ conspiracy to create a pricing ‘umbrella.’”). Umbrella purchasers present particular
13
FOREX III is an exception to this rule, but Judge Schofield’s reasoning is consistent with the analysis
applied by the other judges in this district. As discussed further below, the umbrella purchasers in FOREX III
alleged a direct relationship between the price of the derivatives they purchased and the manipulated benchmark and
that the defendants controlled over 90% of the relevant market. On those facts, Judge Schofield concluded that the
umbrella plaintiffs suffered a direct injury for which damages could be proven and that the risk of disproportionate
liability was limited. FOREX III, 2016 WL 5108131, at *11.
27
challenges to the efficient enforcer analysis: As to the first factor (whether the violation was a
direct or remote cause of injury), umbrella purchasers typically suffer a remote injury, recovery
for which may be disproportionate to the defendants’ wrongdoing. See Mid-West Paper Prods.
Co. v. Cont’l Grp., Inc., 596 F.2d 573, 580-87 (3d Cir. 1979) (permitting umbrella plaintiffs to
recover risks “overkill, due to an enlargement of the private weapon to a caliber far exceeding
that contemplated by Congress” (quoting Calderone Enters. Corp. v. United Artists Theatre
Circuit, Inc., 454 F.2d 1292, 1295 (2d Cir. 1971))); see also Gelboim, 823 F.3d at 778-79.
Because umbrella purchasers do not deal directly with the defendants, there is often a more
directly injured victim available. But see CHF LIBOR, 277 F. Supp. 3d at 562 (recognizing that
umbrella purchasers are similarly situated to direct purchasers in many benchmark-fixing cases);
see also Gelboim, 823 F.3d at 779 (this factor has diminished weight in benchmark-fixing cases).
The potential for intervening causative factors also makes it more likely that umbrella purchasers
will present a risk of speculative damages. See In re Platinum & Palladium Antitrust Litig.,
2017 WL 1169626, at *24-25. And, although not always the case, umbrella purchasers may
present a risk that both sides of a transaction will claim an injury, raising the specter of
duplicative recoveries. See id. at *25; Sullivan, 2017 WL 685570, at *19.
These concerns are particularly acute in this case. Plaintiffs’ claims against the NonFixing Banks do not depend on benchmark manipulation; rather, they allege a comprehensive
scheme of market manipulation, involving rigged bid-ask spreads and coordinated trading in
unspecified silver markets. See TAC ¶ 401 (“Defendants also caused artificial prices by
injecting artificial supply and demand fundamentals into the market through their illegitimate
coordinated trading activity including (a) maintain an artificial bid-ask spread; (b) quoting
systematically lower silver prices in advance of the Silver Fix; and (c) coordinating trading
28
activity, e.g., to intentionally trigger client stop-loss orders.”). Plaintiffs’ proposed class includes
“[a]ll persons or entities that transacted in U.S.-Related Transactions in or on any over-thecounter (“OTC”) market or exchange in physical silver or in a derivative instrument in which
silver is the underlying reference asset . . . , at any time from January 1, 2007 through December
31, 2013,” TAC ¶ 364, regardless of whether they traded a silver-denominated instrument that
was manipulated by the Non-Fixing Banks and regardless of whether they ever dealt with a NonFixing Bank (or a Fixing Bank, for that matter). Although there is often a statistically
significant, or formula-based, connection between a financial benchmark and related derivatives,
the impact of episodic coordinated trading in the silver markets is unclear. The TAC does not
identify which markets were manipulated—physical silver, COMEX futures, CBOT futures, or
some other silver-denominated financial instrument—or identify specific manipulative
transactions, even as examples. The TAC also does not include any econometric analysis of the
impact of the Non-Fixing Banks’ alleged coordinated trading on the markets for physical silver
or silver-denominated assets. Plaintiffs’ class definition presents an obvious risk of
disproportionate damages, even relative to benchmark-fixing cases—which themselves often
entail potential damages in the hundreds of millions, if not billions, of dollars.
For these reasons, discussed more fully below, the Court finds that Plaintiffs are not
efficient enforcers.
(a) Directness of Injury
Evaluating the directness of an injury is essentially a proximate cause analysis that hinges
on “whether the harm alleged has a sufficiently close connection to the conduct the statute
prohibits.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1390 (2014);
see also AGC, 459 U.S. at 540-41 (evaluating directness in light of the “chain of causation”
29
between the asserted injury and the alleged restraint of trade); Lotes Co. v. Hon Hai Precision
Indus. Co., 753 F.3d 395, 412 (2d Cir. 2014) (considering, inter alia, whether the alleged injury
was within the scope of the risk that defendant’s wrongful act created; was a natural or probable
consequence of defendant’s conduct; was the result of a superseding or intervening cause; or
“was anything more than an antecedent event without which the harm would not have occurred”
(quoting CSX Transp., Inc. v. McBride, 564 U.S. 685, 719 (2011) (Roberts, C.J., dissenting)).
“Where the chain of causation between the asserted injury and the alleged restraint in the market
‘contains several somewhat vaguely defined links,’ the claim is insufficient to provide antitrust
standing.” Laydon v. Mizuho Bank, Ltd., No. 12-CV-3419 (GBD), 2014 WL 1280464, at *9
(S.D.N.Y. Mar. 28, 2014) (citing AGC, 459 U.S. at 540).
The relationship between Plaintiffs’ injuries and the Non-Fixing Banks’ conduct is
attenuated and inadequately alleged in the TAC. In a benchmark-fixing case the impact of the
manipulated benchmark on the financial instruments traded by the plaintiff is relatively clear.
For example, and as relevant here, the Fix Price is the price for physical silver, and the price of
physical silver has a 99.85% correlation to the price of silver futures traded on COMEX. See
TAC ¶ 137; Silver I, 213 F. Supp. 3d at 553; see also FOREX III, 2016 WL 5108131, at *9.
Even in cases in which the benchmark is not the sole determinant of prices, there is frequently a
mathematically-defined relationship between prices in the affected market and the benchmark.
See Sullivan, 2017 WL 685570, at *9 (describing mathematical relationship between Euribor and
CME-traded futures contracts). By contrast, the effect of the Defendants’ coordinated trading
and information sharing is undefined, both in the manipulated market (which, as noted
previously, is not specified) and in related markets. Cf. TAC ¶ 263 (“[Deutsche Bank]: did u see
the spoof . . . when he called . . . the futures went a buck wide.”). Plaintiffs have made no effort
30
to explain, in concrete terms, the impact of spoofing, smashing, or pushing on the various
markets for silver derivatives in which they traded; nor have they identified which silver markets
were allegedly manipulated. The TAC’s vague allegations of causation are particularly
problematic because it appears to the Court that any impact on the market may be transient by
design. For example, in order to spoof the market, a trader submits false trades, temporarily
driving the market price up or down and enabling the trader to purchase or sell at an artificial
price. The trader profits when the impact of the spoof on prices dissipates and he or she is able
to repurchase or sell the position. See TAC ¶ 307 (“[Deutsche Bank]: HE SPOOFED IT TO
BUY IT AND I THINK HE JUST SOLD IT TO BUY IT . . . JUST LIKE THEM TO BID IT UP
BEFORE THE FIX THEN GO IN AS A SELLER . . . .”). Put differently, in a highly liquid,
broad market, manipulative trading is highly unlikely to have a persistent impact on market
prices. It is therefore unclear, and the TAC alleges nothing to make it clear, the extent to which
class members were injured by Defendants’ manipulation.
The fact that Plaintiffs are umbrella purchasers makes the causal connection between
their injury and Defendants’ manipulation even less clear. In Gelboim, the Second Circuit
understood there to be little difference, if any, between plaintiffs who purchased directly from
the defendants and umbrella plaintiffs. See Gelboim, 823 F.3d at 779 (“[a]t first glance . . . there
appears to be no difference in the injury alleged by those who dealt in LIBOR-denominated
instruments, whether their transactions were conducted directly or indirectly with the Banks”).
Because the benchmark price has a defined relationship to the affected market, there is not a
significant difference between class-members who transact with the defendants at the
manipulated price and class-members who transact with other market-participants. See id.; CHF
LIBOR, 277 F. Supp. 3d at 559. The same is not true in an episodic manipulation case. Class
31
members who traded directly with the Defendants during an episode of manipulation
experienced the greatest distortion in prices.14 Whether class members who traded minutes or
hours or days later were injured depends on the persistence of the impact of manipulation on the
market. The TAC includes no allegations relevant to that question and, as explained above, the
economics of manipulative trading on a broad, highly liquid market suggest that the impact on
prices is likely to be temporally-limited.
It is also likely that there are numerous intervening causative factors between Plaintiffs’
trades and Defendants manipulative trading. The likelihood of intervening causative factors is
greater in this case than in other similar cases. See, e.g., In re Platinum & Palladium Antitrust
Litig., 2017 WL 1169626, at *22 (quoting LIBOR VI, 2016 WL 7378980, at *16) (“[P]laintiffs
who did not purchase directly from defendants continue to face the same hurdle: they made their
own decisions to incorporate LIBOR into their transactions, over which defendants had no
control, in which defendants had no input, and from which defendants did not profit.”). The
TAC does not include any allegations regarding the impact of Defendants’ alleged manipulative
trading on prices in any market for silver-denominated financial instruments.15 As discussed
above, unlike in a benchmark-fixing case, the relationship between a manipulative quote and the
market price is not clearly defined and, as a matter of logic, the persistence of any effect must
depend on liquidity in the market and the variance between the quote and the market price
(among other variables). See TAC ¶¶ 257-58 (discussing use of different manipulative trading
tactics depending on market liquidity), 260 (discussing “jobbing” a low-volume market).
14
A similarly close causal connection would exist for any class member who placed a stop-loss order that was
triggered by Defendants’ manipulative tactics. No Plaintiff alleges, however, that he placed stop-loss orders, much
less that those orders were triggered by Defendants’ manipulative trading.
15
Likewise, the TAC includes no facts that even remotely suggest that Defendants’ episodic, artificially-wide
bid-ask spreads led to wider spreads in the market generally.
32
The breadth of Plaintiffs’ proposed class definition also raises serious concerns of
ruinous, potentially-disproportionate liability. “[T]o hold defendants trebly responsible for
‘transactions, over which defendants had no control, in which defendants had no input, and from
which defendants did not profit’ would result in ‘damages disproportionate to wrongdoing.’”
CHF LIBOR, 277 F. Supp. 3d at 560-61 (quoting LIBOR VI, 2016 WL 7378980, at *16)
(additional citations and alterations omitted). Plaintiffs’ proposed class includes every
participant in a silver or silver-denominated transaction on a U.S.-based exchange for
approximately six years. According to the TAC, the silver markets trade approximately $30
billion dollars annually. TAC ¶ 125. Recognizing the potential for open-ended liability in cases
involving umbrella purchasers of financial instruments, Judge Schofield focused on the
defendants’ relative control over the affected markets. See FOREX III, 2016 WL 5108131, at *9.
Judge Schofield’s “market control” test has gained traction in this district “as a proxy for the
question of direct causation” for class-members who purchased financial instruments on an
exchange such as COMEX or CBOT. See LIBOR VI, 2016 WL 7378980, at *16; CHF LIBOR,
277 F. Supp. 3d at 561. This Court agrees. Where the defendants substantially control the
market—in FOREX III, the complaint alleged that the defendants controlled 90% of the market,
see FOREX III, 2016 WL 5108131, at *9—there is little risk of disproportionate liability. In
such a market, although in a technical sense the plaintiffs may not have traded directly with the
defendants, the defendants are, de facto, “the market,” and their potential liability is, therefore, in
proportion to their economic control of the market.
The TAC does not allege market control by the Non-Fixing Defendants. According to
the TAC, “UBS was the third most active market maker in the silver spot market” during the
class period. TAC ¶ 76. “Barclays was the eleventh most active U.S. market maker in the silver
33
spot market.” TAC ¶ 89. “Standard Chartered was the eighth most active U.S. market maker in
the silver spot market.” TAC ¶ 98. The TAC does not include similar allegations about the role
of BNP Paribas or BAML in the physical silver markets. In all events, this information does not
shed much light on the Non-Fixing Banks’ role in the exchange-traded silver futures markets. At
the risk of stating the obvious, the Non-Fixing Banks’ role/influence on the spot market for
physical silver has no necessary relationship to their role in the futures markets. Even as to
physical silver, the TAC gives no indication of any of the Non-Fixing Banks’ influence relative
to other participants in the market. The physical silver market may be roughly equally divided
among a dozen market makers or there may be a few giants and a much larger number of bit
players; the TAC leaves the Court guessing. Any inference of market control is further
undermined by the fact that nothing in the chat messages indicates which futures and options
markets were being manipulated. See e.g., TAC ¶¶ 301 (discussion of wide “vols” between
BAML and Deutsche Bank traders without any indication of which silver-denominated
instrument they were discussing), 303 (“Somejackass [sic], . . . sold me 1mm ozs of 1 week 35
silver call at 29 vol yesterday” but no indication on which futures or options market the
complained-of trade occurred.).
In sum, the TAC provides no support for Plaintiffs’ argument that they have suffered a
direct injury from the Non-Fixing Banks’ manipulation of the silver markets. Although this is an
independently adequate basis to find that Plaintiffs are not efficient enforcers, the other efficient
enforcer factors also weigh against Plaintiffs’ claims.
(b) Existence of More Direct Victims
Class-members who traded directly with the Non-Fixing Banks were more directly
injured than Plaintiffs. As discussed above, in a benchmark-fixing case, there is little difference
34
between direct and umbrella purchasers because benchmark-manipulation affects all market
participants equally. See In re Platinum & Palladium Antitrust Litig., 2017 WL 1169626, at *23.
That is not true with episodic manipulation of individual trades because the impact of the
manipulation is not clear, and there is no allegation that the episodic manipulation had a
persistent effect on price. Market participants who were counterparties to the Non-Fixing Banks
in the physical silver market during a period of manipulation would presumably have
experienced the maximum impact of the manipulation. With respect to manipulation of
exchange-traded silver-denominated financial instruments, the most directly impacted class
members would be class members who were counterparties or traded during or immediately after
the Non-Fixing Banks’ manipulation. The TAC includes no allegations from which the Court
could infer that Plaintiffs were counterparties to the Non-Fixing Banks’ manipulative trades in
the silver derivatives markets or that Plaintiffs traded with the Non-Fixing Banks in the market
for physical silver. Accordingly, this factor does not favor Plaintiffs.
(c) Speculative Damages
This case would present difficult damages issues against the Non-Fixing Banks.16 In
order to determine damages, the parties would be required to reconstruct a hypothetical market in
which the Non-Fixing Banks did not engage in episodic manipulation of the silver market. See
CHF LIBOR, 277 F. Supp. 3d at 563; In re Platinum & Palladium Antitrust Litig., 2017 WL
1169626, at *23-24; Sullivan, 2017 WL 685570 at *19. Leaving aside the unique concerns
presented by Plaintiffs’ umbrella claims, it is likely that constructing a hypothetical market
16
That is not to suggest that the damages issues associated with Plaintiffs’ claims against the Fixing Banks
will be child’s play.
35
without manipulation would be exceedingly difficult. As Judge Stein explained in CHF LIBOR,
which dealt with the comparatively less complex circumstance of a benchmark-fixing claim:
Given that the Complaint offers only a handful of specific instances of manipulation and
alleges that the manipulation was varied and episodic, even determining the days on which
manipulation occurred at all may prove quite difficult. Moreover, any damages would need
to be netted out as to each plaintiff to offset any benefit from the defendants’ manipulation
in other transactions.
CHF LIBOR, 277 F. Supp. 3d at 563. As discussed above, the macro impact of manipulative
trading on prices is not at all clear, and the micro impact may not be persistent, depending on
other variables, such as liquidity, volume, the size of the manipulated position, its variance from
equilibrium prices, and other events that caused legitimate movement in prices.17 These
concerns are especially pronounced for umbrella purchasers who may have traded hours or days
after the Defendants’ manipulation.
The Court finds that it would be extremely difficult, if not impossible, to isolate the
impact of coordinated trading and episodic manipulation on an umbrella plaintiff’s trades. See
LIBOR VI, 2016 WL 7378980, at *17; see also In re Platinum & Palladium Antitrust Litig., 2017
WL 1169626, at *25 (“To find antitrust damages in this case would engage the court in hopeless
speculation concerning the relative effect of an alleged conspiracy in a market where countless
other market variables could have intervened to affect those pricing decisions.” (quoting
Reading Indus., Inc. v. Kennecott Copper Corp., 631 F.2d 10, 13-14 (2d Cir. 1980))) (alterations
omitted); CHF LIBOR, 277 F. Supp. 3d at 564 (“Where ‘the damages would be determined
17
Take for example a hypothetical plaintiff whose stop-loss order was allegedly triggered by manipulative
“pushing.” If prices were moving downward already, it is possible, and maybe even likely, that the stop-loss order
would have been triggered regardless. Whether such a plaintiff was injured may depend on whether there is any
injury from triggering the stop-loss order prematurely, by hours or even minutes. Even that assumes the “pushing”
was effective, which depends on market-liquidity and the size of the manipulative position. The Court would also
be required to address this hypothetical plaintiff’s counter-party—also a putative class member—who may have
profited from purchasing at a reduced market price.
36
based on transactions with non-parties, the calculation and apportionment of damages would be
exceptionally complex and have aspects that can fairly be described as speculative.’” (quoting
Sullivan, 2017 WL 685570, at *15)). Although “potential difficulty in ascertaining and
apportioning damages is not . . . an independent basis for denying standing where it is adequately
alleged that a defendant’s conduct has proximately injured an interest of the plaintiff’s that the
statute protects,” Lexmark, 134 S. Ct. at 1392 (emphasis in original), this factor clearly weighs
against Plaintiffs.
(d) Duplicative Recovery and Apportionment of Damages
This factor also weighs against Plaintiffs’ claims against the Non-Fixing Banks.
Plaintiffs seek to recover on behalf of a market-wide class from five defendants who represent an
unknown percentage of the market.18 See In re Platinum & Palladium Antitrust Litig., 2017 WL
1169626, at *25 (damages apportionment would be complex where “[d]efendants represent a
subset of fifty-two [market] members and a subset of the [] market-making members. But the
[complaint] asserts claims on behalf of all market participants, including persons who have not
transacted with Defendants.”) (internal citations omitted). As Judge Castel explained in Sullivan,
“[i]n certain of these transactions, it may not even be apparent which party profited and which
party was injured by the [price] manipulation; given the nature of these transactions, there would
surely be instances in which both sides would claim to have suffered injury.” 2017 WL 685570,
at *19. Finally, it is relevant that the CFTC and Department of Justice have instituted
18
Including the Fixing Banks in the analysis does not significantly change the result. The Fixing Banks are
not alleged to have controlled the markets for physical silver and silver-denominated assets. According to the TAC,
Bank of Nova Scotia was the most active market maker in the physical silver market during the class period. TAC ¶
74. Deutsche Bank was the fifteenth most active market maker in the physical silver market during the class period.
TAC ¶ 43. HSBC was the sixth most active market maker. TAC ¶ 59. Because the TAC does not explain the
distribution of the physical silver market, it is unclear whether these shares represent a large portion of the market,
even aggregated with the Non-Fixing Banks. Moreover, Plaintiffs do not include any allegations with respect to
control of the markets for silver-denominated assets such as futures and options.
37
enforcement actions and criminal cases against several of the defendants and their traders for the
manipulative trading alleged in the TAC. Enforcement actions are relevant because they “lessen
the need for plaintiffs to function as private attorneys general and vindicators of the public
interest.” Sullivan, 2017 WL 685570, at *20 (citing Gelboim, 823 F.3d at 780); see also CHF
LIBOR, 277 F. Supp. 3d at 565.19
In sum, Plaintiffs are not efficient enforcers. Their claims are based on an injury that is
remote from the Non-Fixing Banks’ alleged coordinated trading and market-manipulation and
speculative at best. And, because Plaintiffs do not allege that they dealt with the Non-Fixing
Banks and seek to recover on behalf of a class of all participants in the silver markets, there is a
significant possibility of disproportionate liability. Accordingly, Plaintiffs’ Sherman Act claims
against the Non-Fixing Banks are DISMISSED.20
II.
Commodities Exchange Act Claims
Plaintiffs bring claims for violations of the CEA based on the same bad acts that underlie
their Sherman Act claims. As relevant to this case, Section 9 of the CEA prohibits manipulation
in the markets for commodities and commodities-based derivatives, see 7 U.S.C. § 13, and Rule
19
The existence of parallel investigations is not necessarily relevant to whether plaintiffs’ claims raise a risk
of duplicative recovery. See LIBOR VI, 2016 WL 7378980, at *23. Unless regulators require defendants to pay
restitution, class members will not be compensated through government enforcement actions. Nonetheless,
enforcement actions are relevant to whether private enforcement of the Sherman Act is necessary to accomplish the
goals of the antitrust laws and also whether there is a risk of disproportionate liability. See Gelboim, 823 F.3d at 778
(government enforcement actions are “background context” for whether private enforcement of the Sherman Act is
necessary).
20
Having determined that Plaintiffs are not efficient enforcers, the Court need not address whether they have
suffered an antitrust injury. Nonetheless, as the Court discuses in more detail below with respect to CEA standing,
the Second Circuit’s recent decision in Harry v. Total Gas & Power North America suggests that Plaintiffs have not
suffered an antitrust injury. 889 F.3d 104, 115-16 (2d Cir. 2018) (concluding that because plaintiffs did not allege
actual damages for purposes of the CEA, they also could not allege an antitrust injury); but see Gelboim, 823 F.3d at
770 (“To avoid a quagmire, this Court (among others) assumes ‘the existence of a violation in addressing the issue
of [antitrust] standing.’” (quoting Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 437 (2d Cir. 2005))). The
Court leaves the apparent tension between the analytical approach described in Gelboim and the reasoning in Total
Gas for another day and another case.
38
180.1 prohibits the use of a “manipulative device” in connection with the sale of commodities,
see 17 C.F.R. § 180.1. The Non-Fixing Banks have moved to dismiss Plaintiffs’ CEA claims.
They contend that Plaintiffs were on notice of possible manipulation in the silver futures markets
by January 2014 at the latest. Because the CEA has a two-year limitations period, the NonFixing Banks contend that Plaintiffs’ claims are time-barred. Alternatively, the Non-Fixing
Banks contend Plaintiffs’ claims fail because they seek to recover for foreign conduct that is not
actionable under the CEA and do not sufficiently allege the elements of a claim for manipulation
under the CEA.
A. Timeliness
CEA claims must be brought “not later than two years after the date the cause of action
arises.” 7 U.S.C. § 25(c). Because the CEA does not define when a cause of action accrues,
“courts apply a ‘discovery accrual rule’ wherein ‘discovery of the injury, not discovery of the
other elements of a claim, is what starts the clock.’” In re LIBOR-based Fin. Instruments
Antitrust Litig., 935 F. Supp. 2d 666, 697 (S.D.N.Y. 2013) (“LIBOR I”) (quoting Koch v.
Christie’s Int’l PLC, 699 F.3d 141, 148 (2d Cir. 2012)) (other citations omitted), rev’d on other
grounds by Gelboim, 823 F.3d at 783. “Inquiry notice—often called ‘storm warnings’ in the
securities context—gives rise to a duty of inquiry ‘when the circumstances would suggest to an
investor of ordinary intelligence the probability that she has been defrauded.’” Koch, 699 F.3d at
151 (quoting Lentell v. Merrill Lynch & Co., 396 F.3d 161, 168 (2d Cir. 2005)). “The date on
which one imputes knowledge to a reasonable investor for purposes of [inquiry notice] varies,
depending on what the investor does after being placed on constructive notice.” Staehr v.
Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 426 (2d Cir. 2008). Assuming the investor
responds by making some inquiry, he or she is charged with the “knowledge of what an investor
39
in the exercise of reasonable diligence[] should have discovered concerning the fraud.” Id. at
426 (quoting LC Capital Partners, LP v. Frontier Ins. Grp., Inc., 318 F.3d 148, 154 (2d Cir.
2003)). An objective standard applies to inquiry notice, and the Court may determine whether
plaintiffs were on notice as a matter of law. See Dodds v. CIGNA Sec., Inc., 12 F.3d 346, 350
(2d Cir. 1993).
The Non-Fixing Banks contend that a collection of news articles and press releases cited
in the TAC show that Plaintiffs were on notice that they may have been injured by manipulative
trading in the silver markets as early as 2008 and, at the latest, by January 2014 (approximately
two years and ten months before Plaintiffs sought leave to file the TAC). “[P]ress coverage,
prior lawsuits, or regulatory filings” may put plaintiffs on inquiry notice of their injury. See
Staehr, 547 F.3d at 425. For example, in LIBOR I, Judge Buchwald concluded that a series of
high profile articles—“seven articles published in prominent national news sources”—describing
pricing irregularities in the benchmark LIBOR rate put plaintiffs on notice that they may have
suffered an injury in LIBOR-linked instruments. See LIBOR I, 935 F. Supp. 2d at 700-03. The
articles in LIBOR I described detailed statistical analyses of pricing irregularities and ran under
headlines like “Special Topic: Is LIBOR Broken?” Id. And because the articles concerned
manipulation of the benchmark LIBOR rate, it was relatively straightforward for an investor to
come to the conclusion that the manipulation would have a direct impact on the LIBOR-linked
instruments traded by the plaintiffs.21 Id.
21
Judge Buchwald explained the inquiry in LIBOR I as asking whether the plaintiffs would be on notice of
their injury, as opposed to the elements of their claim. See LIBOR I, 935 F. Supp. 2d at 705 (“Unlike inquiry notice
under the ’34 Act, which requires plaintiffs to be able to plead a claim . . . inquiry notice under the CEA requires
only that plaintiffs be on inquiry notice of their injury.”). Judge Buchwald proceeded to analyze this issue as
whether plaintiffs would have been aware of manipulation of LIBOR, from which they could conclude they had
suffered an injury in LIBOR-linked trades. Judge Buchwald’s focus on awareness of a probability of an injury is in
tension with Judge Stein’s recent decision in CHF LIBOR, in which he analyzed the question as whether plaintiffs
would have been on notice of their claims against each defendant. See CHF LIBOR, 277 F. Supp. 3d at 575
(“However, the UBS non-prosecution agreement did not put plaintiffs on inquiry notice with respect to CEA claims
40
The articles and press releases cited in the TAC do not contain information that is as
specific as the information contained in the articles in LIBOR I, and they do not describe alleged
misconduct with a similarly-direct connection to the injury alleged by Plaintiffs. The NonFixing Banks rely on three statements by the CFTC in September 2008, February 2013, and
September 2013, which, they contend, put Plaintiffs on inquiry notice of manipulation in the
silver markets. The 2008 press release reads, in its entirety: “In September 2008 the CFTC
confirmed that its Division of Enforcement has been investigating complaints of misconduct in
the silver market.” See TAC ¶ 345 & n.190. The press release includes no information about the
financial products involved, the time period of the alleged misconduct, or the markets in which
the misconduct allegedly occurred. In February 2013, CFTC commissioner Bart Chilton stated
publicly that there was reason to believe that benchmarks like the Silver Fixing may have been
manipulated. See TAC ¶ 335 (quoting Commissioner Chilton as saying “[g]iven what we have
seen in LIBOR, we’d be foolish to assume that other benchmarks aren’t venues that deserve
review”). Chilton’s discussion of the Silver Fixing might be a basis for the Court to find that
Plaintiffs were on notice of manipulation of the Silver Fixing, but the statement has little
relevance to Plaintiffs’ CEA claims against the Non-Fixing Banks, which seek to recover for
artificial prices caused by episodic market manipulation. The CFTC’s September 2013 closure
notice is more directly on point and includes more specificity than the 2008 announcement, but
because the CFTC concluded that there “is not a viable basis to bring an enforcement action with
respect to any firm or its employees,” the Court cannot say that a reasonable investor would have
been on notice that he had probably been injured. See TAC ¶ 345 & n.191.
against defendants other than UBS.”); see also FOREX III, 2016 WL 5108131, at *27 (analyzing inquiry notice
defendant by defendant). The Court need not resolve this issue because none of the notice materials cited in the
TAC is a basis for the Court to find that, as a matter of law, Plaintiffs were on notice that they may have been the
victims of episodic market manipulation.
41
The other articles cited by the Non-Fixing Banks also relate to manipulation of the Silver
Fixing or are too general to put Plaintiffs on inquiry notice. Deutsche Bank resigned its seat on
the Silver Fixing in January 2014 in response to scrutiny from the German securities regulator
BaFin.22 See TAC ¶ 337. Plaintiffs’ CEA claims do not depend on any connection to the Silver
Fixing.23 The fact that BaFin was scrutinizing the benchmark Silver Fixing process, and that the
inquiry was serious enough for Deutsche Bank to respond by resigning its seat, may have led a
reasonable investor to suspect benchmark-manipulation, but the Court cannot say the same
information would put a reasonable investor on notice that he had been the victim of episodic
manipulative trading strategies.
The Non-Fixing Banks also point to UBS’s November 2014 settlement with FINMA of
allegations of market manipulation by foreign exchange and precious metals traders. TAC ¶¶
339-40. But the relevant discussion in the FINMA report either references manipulation of the
Silver Fixing or is too generic to have put Plaintiffs on notice (at least at this stage). See Swiss
Financial Market Supervisory Authority (FINMA), Foreign Exchange Trading at UBS AG:
Investigation Conducted by FINMA, at 12 (November 12, 2014),
https://www.finma.ch/en/news/2014/11/mm-ubs-devisenhandel-20141112/. FINMA Report at
12 (describing “repeated front running (especially in the back book) of silver fix orders of one
client.”). The FINMA report also alludes to manipulation in the precious metals spot markets
more generally, but it does not provide key details such as the commodities or financial products
22
The contemporaneous press accounts cited in the TAC are similar. They focus on potential manipulation of
the Gold and Silver Fixings, not episodic manipulation in the silver-denominated derivatives markets. See TAC ¶
337 & nn.185-86.
23
Defendants appear to appreciate this distinction—at least when it is in their interest. In pointing to silverrelated lawsuits filed against JP Morgan in 2010 and 2011, Defendants distinguish the Court’s previous discussion
of these lawsuits in Silver I as evaluating them relative to Plaintiffs’ Silver Fixing claims. That distinction is a
meaningful one, but it cuts both ways.
42
involved, the markets in which they were traded, or the frequency or approximate dates of the
manipulation. At this stage in the proceedings and without additional information, the Court
cannot conclude that in 2014 a reasonable investor would have been aware of the probability that
they had traded in the silver markets at artificial prices.24
In sum, at the motion to dismiss stage, none of the articles and press releases contained in
the TAC is sufficiently on point for the Court to conclude that a reasonable investor would have
been on notice of the probability that the silver markets in which they traded were being
episodically manipulated or that they had traded at artificial prices.25
B. Extraterritoriality
The private right of action under the CEA does not apply to extraterritorial transactions.
See Loginovskaya v. Batratchenko, 764 F.3d 266, 272 (2d Cir. 2014) (“Given the absence of any
‘affirmative intention’ by Congress to give the CEA extraterritorial effect, we must ‘presume it is
primarily concerned with domestic conditions.’” (quoting Morrison v. Nat’l Austl. Bank Ltd.,
561 U.S. 247, 255 (2010))). The “focus” of the private right of action under the CEA, 7 U.S.C. §
25 (“Section 22”), is on “domestic conduct, domestic transactions, or some other phenomenon
localized to the United States.” Loginovskaya, 764 F.3d at 272. First in Loginvoskaya, and then
24
In 2010 and 2011, several of the Plaintiffs sued JP Morgan Chase and HSBC, alleging that they conspired
to suppress the price of silver and silver-denominated instruments traded on COMEX between 2008 and 2010
through an outsized net-short position. Joint Mem. at 30 & n.18; see In re Commodity Exch., Inc. Silver Futures &
Options Trading Litig., No. 11-MD-2213 (RPP), Dkt. 85 (Consolidated Class Action Complaint) ¶¶ 3-7, 68-69.
Those claims were precipitated by a CFTC investigation of manipulation of the silver markets by JP Morgan Chase.
See id. at 1 n.1. The only connection between those claims and this case (at least against the Non-Fixing Banks)
appears to be that JP Morgan was accused of manipulating one of the markets in which Plaintiffs traded during a
discrete period that overlaps with the class period in this case. The Court cannot say that, as a matter of law, a
reasonable investor would infer from this connection that there was a probability that he or she had been injured at
other times, in other markets, or by different trading behavior by other banks.
25
Because Plaintiffs were not on inquiry notice, the Court need not address whether the statute of limitations
was tolled pursuant to the fraudulent concealment doctrine or whether Plaintiffs’ claims against UBS relate-back
under Rule 15.
43
more recently in Myun-Uk Choi v. Tower Research Capital LLC, 890 F.3d 60, 66 (2d Cir. 2018),
the Second Circuit has explained that the CEA applies to “domestic transactions” as that term
was defined in Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012).
Tower Research Capital, 890 F.3d at 66 (citing Ficeto, 677 F.3d at 67, and Loginovskaya, 764
F.3d at 274). A transaction is a “domestic transaction” if “irrevocable liability is incurred or title
passes within the United States.”26 Ficeto, 677 F.3d at 67.
Whether a transaction is a “domestic transaction” within the meaning of Ficeto is not,
however, necessarily the end of the inquiry. In Parkcentral Global Hub Ltd. v. Porsche
Automobile Holdings SE, 763 F.3d 198 (2d Cir. 2014), the Second Circuit held that a “domestic
transaction” is necessary but “not alone sufficient to state a properly domestic claim under the
[Exchange Act.].” Id. at 215. Although Parkcentral concerned claims under Section 10(b) of
the Exchange Act, 15 U.S.C. § 78j et seq., the holding in Parkcentral has been applied to CEA
claims as well. See In re North Sea Brent Crude Oil Futures Litig., 256 F. Supp. 3d 298, 307
(S.D.N.Y. 2017). As conceptualized by the Court in North Sea Brent Crude Oil, the
extraterritoriality analysis under the CEA has two parts: at step one the Court must determine
whether the plaintiff’s claim involves a “domestic transaction.” Assuming this requirement is
satisfied, the Court must proceed to step two and consider whether the claims are “so
predominantly foreign as to be impermissibly extraterritorial,” Parkcentral, 763 F.3d at 216. See
In re North Sea Brent Crude Oil Futures Litig., 256 F. Supp. 3d at 308-10.
The parties dispute the framework for the Court’s analysis and, unsurprisingly, the result
at each step. The Non-Fixing Banks contend that both the plaintiffs’ and defendants’
transactions must be “domestic” under Loginovskaya. See Joint Supp. Mem. (Dkt. 352) at 2.
26
The locus of irrevocable liability is not disputed in this case. The parties agree that Plaintiffs incurred
irrevocable liability in the United States.
44
Because Plaintiffs do not allege that they were counterparties to the Non-Fixing Banks’ alleged
manipulative trades, the Non-Fixing Banks’ position is that the transactions at issue are
“domestic” only if both the manipulative trading activity (e.g., spoofing) and the transaction in
which the Plaintiff was injured are domestic. Even assuming Plaintiffs’ claims involve a
“domestic” transaction, the Non-Fixing Banks contend that the underlying conduct is so
predominantly foreign that, under Parkcentral, the CEA does not apply. Joint Mem. at 46.
Plaintiffs, on the other hand, take the position that the extraterritoriality analysis begins and ends
with whether their transactions are “domestic.” The parties agree that Plaintiffs transacted on
COMEX and so, according to Plaintiffs, that is the end of the analysis. Opp’n at 39-40.
Plaintiffs contend Parkcentral does not apply to the CEA because Plaintiffs transacted on a
“domestic exchange,” rather than through domestic, over-the-counter transactions. Opp’n at 3940.
Although the issue is a close one, the Court finds that the relevant transaction for
purposes of Section 22 is the transaction in which the plaintiff is injured—in this case Plaintiffs’
trades of COMEX and CBOT futures and options. So far as the Court is aware, this issue has
been squarely presented only once before, in In re North Sea Brent Crude Oil Futures Litigation.
See 256 F. Supp. 3d at 308-09 (assuming, without deciding, that the relevant transaction is the
futures or options transaction in which plaintiff is injured). Nevertheless, the result clearly
follows from the text of Section 22 and the Supreme Court’s analysis in Morrison. As relevant
here, Section 22 provides a private right of action to “[a]ny [] person . . . who purchased or sold
[any contract of sale of any commodity for future delivery (or option on such contract or any
commodity) or any swap] . . . if the violation constitutes . . . (ii) a manipulation of the price of
45
any such contract or swap or the price of the commodity underlying such contract or swap.”27 7
U.S.C. § 25(a)(1)(D)(ii). The statute is concerned with the protection of market participants
injured by manipulation of the price of the “contract or swap” itself. As Judge Carter explained
in North Sea Brent Crude Oil, the Supreme Court understood similar language in the Exchange
Act to be focused on the plaintiff’s transaction, rather than the manipulation itself. See In re
North Sea Brent Crude Oil Futures Litig., 256 F. Supp. 3d at 308 (citing Morrison, 561 U.S. at
266-67); but see Loginovskaya v. Batratchenko, 936 F. Supp. 2d 357, 370 (S.D.N.Y. 2013)
(Oetken, J.) (describing Section 22 as “an explicit, statutory right of action framed in terms of
prohibited conduct”). Because the “manipulation” referenced in Section 25(a)(1)(D)(ii) is not
necessarily manipulative trading (i.e., a transaction), the alternative understanding of the statute
would untether the analysis from a “transaction” as required by Loginovskaya.
Having determined that the relevant transaction is the plaintiff’s, there is no dispute that
these Plaintiffs’ claims involve “domestic transactions,” and the Court proceeds to step two of
the analysis. Plaintiffs contend that Parkcentral is inapplicable to their claims because they
traded on a “domestic exchange.” See Opp’n at 40. Plaintiffs’ reference to a “domestic
exchange” derives from Morrison, which interpreted the Exchange Act to be focused on
“transactions in securities listed on domestic exchanges, and domestic transactions in other
securities, to which § 10(b) applies.” Morrison, 561 U.S. at 267. Because Parkcentral
27
The bracketed language is cross-referenced from subsection (a)(1)(B) of Section 22. The Court assumes
for purposes of analysis that the statute permits a plaintiff to sue if he has been injured by defendant’s manipulation,
even if the plaintiff and defendant are not counterparties. See In re Amaranth Nat. Gas Commodities Litig., 587 F.
Supp. 2d 513, 537 (S.D.N.Y. 2008) (“buyers and sellers of commodities can sue a trader who was not their
counterparty only under section 22(a)(1)(D)”). Nonetheless, there is a textual argument that the statute requires a
plaintiff proceeding under subsection 22(a)(1)(D) to be the counterparty of the defendant. Subsection (a)(1)(D)
provides a private right of action to persons “who purchased or sold a contract referred to in subparagraph (B)
hereof.” 7 U.S.C. § 25(a)(1)(D). In turn, subsection (B) provides a cause of action for any person “who made
through such person any contract of sale of any commodity for future delivery . . . .” 7 U.S.C. § 25(a)(1)(B). The
“such person” referred to in subsection (B) is the defendant. The Non-Fixing Banks have not made this argument,
and the Court does not resolve it.
46
considered a “domestic transaction,” rather than a transaction on a “domestic exchange,”
Plaintiffs contend it is distinguishable.
Plaintiffs’ argument is unconvincing, and likely foreclosed by the Second Circuit’s recent
decision in Tower Research Capital. As Tower Research Capital explained, the Supreme
Court’s reference to transactions on a “domestic exchange” is rooted in the language of the
Exchange Act, which applies to deceptive conduct “in connection with the purchase or sale of
any security registered on a national securities exchange . . . .” 15 U.S.C. § 78j(b); Tower
Research Capital, 890 F.3d at 67. The language of the CEA is different. Section 22 does not
reference an exchange. Instead, it creates a private right of action for four categories of injured
persons: plaintiffs who “(A) received trading advice from Defendants for a fee; (B) traded
through Defendants or deposited money with Defendants in connection with a commodities
trade; (C) purchased from or sold to Defendants or placed an order for purchase or sale of a
commodity through them; or (D) [suffered actual damages resulting from] certain market
manipulation activities in connection with the purchase or sale of a commodity contract.”28
Starshinova v. Batratchenko, 931 F. Supp. 2d 478, 487 (S.D.N.Y. 2013) (citing 7 U.S.C. §
25(a)(1)(A)-(D)); but see LIBOR I, 935 F. Supp. 2d at 696 (analyzing the substantive provision
of the CEA underlying plaintiff’s claims and concluding that a commodities transaction is
domestic under the CEA if it “involves (1) commodities in interstate commerce or (2) futures
contracts traded on domestic exchanges”).
28
Where a plaintiff alleges he traded on a domestic exchange, this distinction is unlikely to be of practical
significance. A transaction on a “domestic exchange” is almost certain to be a “domestic transaction” within the
meaning of Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012).
47
But, in any event, nothing in Parkcentral limits the Court’s holding to “domestic
transactions,” as Plaintiffs insist.29 Parkcentral recognizes the possibility that a claim based on a
technically “domestic” transaction can be so rooted in foreign conduct that the claim itself is an
extra-territorial application of the statute. See Parkcentral, 763 F.3d at 215-16. As Parkcentral
explained, the motivating concern in Morrison was that application of U.S. securities laws to
foreign conduct where it was not intended by Congress is likely to run the risk of incompatibility
with foreign law and unduly intrude upon the sovereignty of foreign nations. Id. at 215-16. A
claim may be based on a transaction that is technically “domestic” or that occurred on a
“domestic exchange” and nonetheless raise this concern. Id.; see also id. at 214 (“If a domestic
transaction in a security is not only necessary but also sufficient to justify the application of §
10(b) to otherwise foreign facts . . . [t]he mere fact that the plaintiffs based their suit on a
domestic transaction would make § 10(b) applicable to allegedly fraudulent conduct anywhere in
the world.”). The facts in Morrison did not require the Supreme Court to address this scenario
because in that case the underlying bad conduct was primarily domestic, while the transaction
was foreign. Like Parkcentral, this case raises the opposite fact-pattern: a domestic transaction
and a claim based primarily on foreign bad acts. But nothing in Parkcentral indicates its
discussion was limited to “domestic transactions;” rather, the Court referred to “a domestic
transaction or listing,” id. at 216, and held “that, while [Morrison] unmistakably made a
domestic securities transaction (or transaction in a domestically listed security) necessary . . . ,
such a transaction is not alone sufficient to state a properly domestic claim under the statute,” id.
at 215.
29
Plaintiffs do not contend that Parkcentral is distinguishable because it analyzed the Exchange Act and not
the CEA. As discussed below, the same concerns apply whether the statute at issue is the Exchange Act or CEA,
and there is nothing in the CEA that indicates Congress intended to include within its reach a broader class of
predominantly foreign transactions than are covered under the Exchange Act.
48
Taking a step back, adopting Plaintiff’s understanding of Morrison would raise exactly
the same concern that animated the Circuit’s decision in Parkcentral. Under Plaintiffs’ reading,
a course of conduct that is entirely foreign—undertaken by foreign actors, executed in foreign
transactions, and intended to have an impact primarily on foreign interests—could be deemed
domestic, and subject to U.S. law, simply because it had an effect on a U.S.-based transaction.
See Parkcentral, 763 F.3d at 215 (explaining that such a holding would “seriously undermine”
the presumption against extraterritoriality). Morrison’s most colorful passage addresses this
approach directly: “the presumption against extraterritorial application would be a craven
watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the
case.” Morrison, 561 U.S. at 266. In sum, the Court finds that Parkcentral applies to claims
under the CEA. Accord In re North Sea Brent Crude Oil Futures Litig., 256 F. Supp. 3d at 30910 (Parkcentral applies to CEA claims).
Applying Parkcentral, the Court concludes that Plaintiffs’ CEA claims against Barclays,
Standard Chartered, and BNP Paribas are impermissibly extraterritorial. The TAC’s factual
allegations against these three defendants have only an attenuated connection to Plaintiffs’
domestic transactions. The factual allegations against Barclays relate to thirteen chat
conversations in which Barclays traders shared confidential information or coordinated trading
strategies with traders at Deutsche Bank. See Declaration of Michael S. Feldberg (“Feldberg
Declr.”) (Dkt. 313) Ex. C. The chat messages involve traders in London and Singapore. It is
entirely speculative whether the silver products discussed in the chat messages include COMEX
or CBOT futures or options; Plaintiffs have made no factual allegations from which the Court
could infer that these traders manipulated COMEX- or CBOT-traded products directly.
Plaintiffs also do not allege they were the counterparties to any of the manipulative conduct
49
described in the chats. The only connection between the chats and Plaintiffs’ domestic
transactions appears to be the alleged “ripple” effect of the manipulation referenced in the chats
on the COMEX and CBOT markets. Even that potential impact on Plaintiffs’ domestic
transactions is not free from doubt. Plaintiffs do not allege the frequency of the Non-Fixing
Banks’ manipulation, the persistence of the impact of episodic manipulation in the relevant silver
market (much less in related silver markets), or that Plaintiffs traded close in time to the alleged
manipulation (other than a few occasions on which the chats took place on the same day as
Plaintiffs traded).
What has been said about Barclays is true for Standard Chartered and BNP Paribas as
well: there are only eight chat messages involving BNP Paribas traders, see BNP Paribas Supp.
Mem. (Dkt. 306) at 1, and no indication that any of the misconduct discussed in the chats
involved COMEX- or CBOT-traded products, see Declaration of Joshua A. Goldberg
(“Goldberg Declr.”) (Dkt. 314) Ex. A. For example, the most egregious message involving BNP
Paribas states: “CANT WAIT FOR ANOTHER DAY WHEN WE GET THE BULLDOZER
OUT THE GARAGE ON GOLD OR SIL, THEY ARE MY FIRST PORT OF CALL
HAHAHAHAHAH LET ME KNOW WHEN THEY START QUOPTING [sic] 10K’S THO.”
TAC ¶ 300. But Plaintiffs do not allege that the trader ever, in fact, took his “bulldozer” out of
the garage relative to silver, and if he did, in which silver market, or when the alleged
manipulation occurred. See TAC ¶¶ 286-90; see also Declaration of Hannah Chouikhi
(“Chouikhi Declr.”) (Dkt. 317) Ex. A. The chats describe sharing information, see TAC ¶¶ 28690, but do not describe any particular manipulative trading tactics or reference particular silver
products (much less domestic silver products). The only inference that can be gleaned from the
messages is that BNP Paribas and Standard Chartered traders, like Barclays traders, engaged in
50
what appears to be wrongful conduct abroad. How or whether that conduct affected any
domestic transactions, let alone Plaintiffs’ specifically, is entirely speculative.
Plaintiffs do not respond directly to these arguments. Instead, they cite to three
categories of evidence that are either inapposite under Parkcentral or too general to be
persuasive. See Opp’n at 40. Although Plaintiffs claim the “defendants” (which defendant is not
specified) traded COMEX futures during the class period, they provide no factual allegations to
substantiate this claim or to link Defendants’ COMEX trades to the manipulation at issue in their
CEA claims. Plaintiffs contend the “defendants” “conspired to illegitimately increase profits on
their silver trading positions,” but the paragraphs of the TAC cited for support concern the Silver
Fixing. See Opp’n at 40 (citing TAC ¶¶ 14, 164-67, and 172-75). For the reasons given above
(at length), Plaintiffs’ allegations regarding the Non-Fixing Banks’ involvement in a conspiracy
to manipulate the Silver Fixing are implausible.30 Next, Plaintiffs focus on the domestic trading
operations maintained by UBS, Barclays, BNP Paribas, and Standard Chartered during the class
period. The TAC includes no factual allegations that U.S.-based traders from Barclays, BNP
Paribas, or Standard Chartered were involved in the manipulation alleged in the TAC; U.S. based
traders are included in none of the referenced chats. Finally, Plaintiffs rely on the chats
themselves, and a blanket reference to a “conspiracy,” but, for the reasons discussed above, the
chats involving Standard Chartered, Barclays, and BNP Paribas do not reference manipulation
connected to the Plaintiffs’ domestic transactions. Furthermore, the existence of a conspiracy
writ large does not connect these Plaintiffs to the more specific allegations of CEA violations.
30
The Fixing Banks did not argue that Plaintiffs’ Silver Fixing-related claims were impermissibly
extraterritorial. Because the Silver Fix has a direct and persistent correlation to the price of domestic silver futures,
see TAC ¶ 137, and Plaintiffs contend that the Fixing Banks profited from their manipulation of the Silver Fixing by
trading in the silver futures markets (among other markets), Plaintiffs’ claims against the Fixing Banks involve bad
acts with a significantly closer connection to domestic transactions.
51
By contrast, there are sufficient facts alleged (although barely) for the Court to find that
Plaintiffs’ CEA claims against UBS and BAML are plausibly domestic. Although the chats
involving UBS and BAML do not specifically reference manipulation of COMEX or CBOTfutures (or any domestic market for that matter), recent enforcement actions by the CFTC and
Department of Justice indicate that UBS and BAML traders manipulated the domestic markets in
which Plaintiffs traded. These allegations are sufficient—at this stage—to allege that Plaintiffs
claims are not “so predominantly foreign as to be impermissibly extraterritorial.” Parkcentral,
763 F.3d at 216. On January 29, 2018, UBS settled the CFTC’s allegations that UBS traders
manipulated the price of precious metals futures contracts, including silver-denominated futures
on COMEX, the same platform allegedly used by the Plaintiffs. See UBS CFTC Order at 2-3.
The conduct alleged in the CFTC’s accompanying order is similar to the conduct alleged in the
TAC, and the Order appears to quote some of the same chat messages. See UBS CFTC Order at
5-6; see also Letter from Eric J. Stock (Dkt. 347) at 2 (acknowledging on behalf of UBS that the
UBS CFTC Order describes some of the same incidents as in the TAC). The conduct alleged in
the Order includes “spoofing” futures markets, coordinated trading, and coordinated price
manipulation intended to trigger stop-loss orders. See UBS CFTC Order at 3 (“Generally, the
Traders placed relatively large bids or offers in the futures market with the intent to cancel before
execution.”), 4 (describing incident in which a UBS trader colluded with a trader at another bank
to trigger a stop-loss order in the precious metals futures market).31 Similarly, the Department of
Justice indicted two BAML traders who are alleged to have “spoofed” COMEX futures between
31
The CFTC also brought a civil action against Stamford, Connecticut-based UBS trader, Andre Flotron.
The CFTC’s complaint alleges that Flotron manipulated the COMEX silver futures market on an “ongoing basis”
between 2008 and 2013. Dkt. 344 Ex. 4. Although the CFTC’s allegations are just that, the fact remains that they
are supported by factual allegations that describe manipulation of domestic transactions by UBS traders, at times in
the United States.
52
2010 and 2014. See BAML Complaint at 1-2. The spoofing alleged by the Department of
Justice includes silver futures. BAML Complaint ¶ 15. This conduct, involving manipulation of
the domestic markets using the same tactics and involving some of the same individuals as
alleged in the TAC, is sufficient at this stage to establish that Plaintiffs’ claims against UBS and
BAML are not “predominantly foreign.”
C. Failure to State a Claim
Regardless of whether any of Plaintiffs’ CEA claims pass muster under Parkcentral,
however, they fail because Plaintiffs do not plausibly allege the elements of a claim under the
CEA against any of the Non-Fixing Banks. Section 9(a)(2) of the CEA makes it unlawful for
“[a]ny person to manipulate or attempt to manipulate the price of any commodity in interstate
commerce.” 7 U.S.C. § 13(a)(2). There are four elements to a manipulation claim. See Silver I,
213 F. Supp. 3d at 566. “Plaintiffs must allege that: ‘(1) Defendants possessed an ability to
influence market prices; (2) an artificial price existed; (3) Defendants caused the artificial prices;
and (4) Defendants specifically intended to cause the artificial price.’” Id. (quoting In re
Amaranth Nat. Gas Commodities Litig., 730 F.3d 170, 173 (2d Cir. 2013)) (additional citations
omitted). In addition, Plaintiffs must allege “actual damages resulting from” the alleged
manipulation. In re Amaranth Nat. Gas. Commodities Litig., 269 F.R.D. 366, 378 (S.D.N.Y.
2010) (quoting 7 U.S.C. § 25(a)(1)(D)). The actual damages requirement is often referred to as
“CEA standing.” See In re LIBOR-based Fin. Instruments Antitrust Litig., 962 F. Supp. 2d 606,
620 (S.D.N.Y. 2013) (“LIBOR II”). Although described as an aspect of standing, CEA standing
is actually an element of the substantive cause of action. Total Gas & Power N. Am., Inc., 889
F.3d at 112. Market manipulation claims sounding in fraud must be pleaded with particularity in
53
accordance with Rule 9(b) of the Federal Rules of Civil Procedure.32 See LIBOR I, 935 F. Supp.
2d at 713-14; Silver I, 213 F. Supp. 3d at 565.
The TAC asserts two theories of market manipulation. The more prominent theory is that
the Non-Fixing Banks conspired with the Fixing Banks to suppress the Silver Fixing. See TAC
¶¶ 398, 401-02. The TAC also alleges that the Non-Fixing Banks manipulated the silver markets
through a campaign of episodic market manipulation. See TAC ¶¶ 399-402. For the reasons the
Court has already discussed, the alleged connection between the Non-Fixing Banks and a
conspiracy to suppress the Silver Fixing is implausible. See supra at 12-20. To summarize
briefly: the chat messages referencing the Silver Fixing describe bilateral and unilateral attempts
to manipulate the Silver Fixing and are inconsistent with a broader conspiracy to suppress the
Fix Price; Plaintiffs’ econometric analysis does not tie the Non-Fixing Banks to a conspiracy to
suppress the Fix Price;33 and, the manipulative conduct referenced in the chat messages was
profitable to the traders involved regardless of whether they also were part of a conspiracy to
suppress the Fix Price. Accordingly, because Plaintiffs have not plausibly linked the Non-Fixing
Banks to a conspiracy to suppress the Silver Fixing, Plaintiffs also have not plausibly alleged a
CEA claim based on that theory.
Plaintiffs have not plausibly alleged that they suffered actual damages from episodic
manipulation of the silver markets. Plaintiffs’ allegations of the impact of Defendants’
manipulation on prices in the COMEX futures market (or CBOT futures market) depend almost
entirely on an econometric analysis of the impact of the Silver Fixing on the price of COMEX
32
The Court need not determine whether Plaintiffs’ claims sound in fraud because Plaintiffs’ allegations fail
under either Rule 8 or Rule 9(b).
33
The TAC includes a few charts that show a few parallel quotes on a few days by BNP Paribas and UBS.
TAC ¶¶ 181-83. While the parallel quotes could be evidence of collusion, it is also possible that they are just the
result of random chance.
54
futures. See Opp’n at 36 (citing econometric analysis of the impact of the Silver Fixing on other
markets contained in TAC ¶¶ 143-98). Stripped of this analysis—which is irrelevant to
Plaintiffs’ episodic manipulation theory—the TAC alleges essentially no connection between
Defendants’ manipulative conduct and trades by the Plaintiffs. Plaintiffs have made no factual
allegations of the frequency of episodic manipulation or the predicted impact of episodic
manipulation on silver prices. For similar reasons, and even assuming Plaintiffs alleged actual
damages, they have not alleged a connection between the alleged episodic market manipulation
by the Non-Fixing Banks and the existence of artificial prices in the COMEX silver futures
market.
In order to plead “actual damages” under Section 22, Plaintiffs must make “a showing of
actual injury caused by the violation.” CHF LIBOR, 277 F. Supp. 3d at 570 (quoting Harry v.
Total Gas & Power N. Am., Inc., 244 F. Supp. 3d 402, 412-13 (S.D.N.Y. 2017)) (additional
citation omitted). As the Second Circuit recently explained in Total Gas, the relative difficulty
of pleading actual damages depends on the predictability of the impact of the defendant’s
manipulation on a market and the connection between that market and the plaintiff’s trades. 889
F.3d at 112 (“In some contexts, the alleged facts can be quite general statements . . . . Suffice it
to say that the more overlap [between a plaintiff’s trades and a defendant’s manipulation], the
more plausible a defendant’s effect on a plaintiff will be.”); see also id. at 113 (“When a plaintiff
seeks to make plausible a connection between distinct contract types traded on distinct
exchanges without a formal rule-based price linkage she will have to plead with greater detail.”).
Although this statement is a truism to a degree, it is borne out by other benchmark-fixing cases in
this district. In LIBOR I, Judge Buchwald concluded that allegations of persistent suppression of
the LIBOR benchmark were sufficient to allege actual injury in LIBOR-denominated assets. See
55
LIBOR I, 935 F. Supp. 2d at 718-19; see also Silver I, 213 F. Supp. 3d at 564-65; In Platinum &
Palladium Antitrust Litig., 2017 WL 1169626, at *29 (concluding plaintiffs adequately alleged
actual damages in a persistent suppression case by cross-referencing the days on which they
traded with a preliminary list of “suppression[] dates”); Sullivan, 2017 WL 685570, at *31. The
LIBOR plaintiffs were not required to identify specific manipulative transactions (or transactions
in which they suffered an injury) because the persistent suppression they alleged would
necessarily have had an impact on LIBOR-linked contracts sold during the suppression period.
Id. Nor could plaintiffs identify with precision their injury, because information regarding the
“true,” i.e., un-manipulated, level of LIBOR was known only to the defendants, if at all. Id. at
716, 718-19; see also id. at 719 n.17. In each of these cases the impact of the defendant’s
manipulation was well-defined, and the plaintiffs traded in the same or closely linked markets.
Alleging actual damages in an “episodic manipulation” case is more difficult. As the
name suggests, episodic manipulation does not warp market forces continuously throughout the
class period or in a predictable manner. See In re LIBOR-Based Fin. Instruments Antitrust Litig.,
27 F. Supp. 3d 447, 461 (S.D.N.Y. 2014) (“LIBOR III”) (“[S]ince LIBOR was allegedly artificial
only for discrete days during the Class Period, by their own reckoning, plaintiffs may have
transacted on many days when LIBOR was ‘true.’”); see also CHF LIBOR, 277 F. Supp. 3d at
570-71 (finding plaintiff did not allege actual damages from episodic manipulation because the
complaint lacked “any details of his [the plaintiff’s] transactions [because] it is just as likely he
was a beneficiary of defendants’ misconduct—substantially reducing the already questionable
likelihood of harm from manipulation on the dates of [plaintiff’s] transactions”). Manipulative
trading strategies like “spoofing” or triggering stop-loss orders depend for their profitability on a
reversion of prices to the market-level, meaning that the period of artificiality may be brief.
56
Market liquidity is also relevant, because the impact of manipulation in highly liquid markets
(like the silver markets, see TAC ¶ 125), is likely to be less than the impact of manipulation in
less liquid or illiquid markets. Because episodic manipulation—unlike persistent suppression—
may move the market in either direction, it is not always clear that every trader who was affected
by the manipulation was harmed; “[o]ne trader cannot ride the wave of another trader’s scheme
and then drag the manipulator to court for having caused her good fortune.” Total Gas & Power
N. Am., Inc., 889 F.3d at 112; LIBOR III, 27 F. Supp. 3d at 461 (“Moreover, because the
manipulation was allegedly varying in direction, there may be some days when plaintiffs were
actually helped, rather than harmed, by the alleged artificiality, depending on their position in the
market.”). While Total Gas primarily concerned the linkage (or lack thereof) between the
manipulated market and the market in which the plaintiffs traded, there is a rough analogy
between the “formal rule-based price linkage” missing in Total Gas and a defined and
predictable market impact from the manipulative tactics alleged in the TAC. Where, as in this
case, plaintiffs do not plausibly allege a predictable and persistent market impact from
manipulation, relatively more detailed allegations are required.34 Cf. Total Gas & Power N. Am.,
Inc., 889 F.3d at 113 (“When a plaintiff seeks to make plausible a connection between distinct
34
That is not to say that Plaintiffs must necessarily allege “the specific transactions on which they were
injured.” See FOREX III, 2016 WL 5108131, at *22 (rejecting this argument). Although information regarding
particular transactions is a straightforward method of pleading actual damages, it is not the only means of doing so.
Among other things, statistical analysis of market prices and quotes or allegations based on government enforcement
actions may suffice to allege the expected impact of a manipulative tactic on a given market and the expected
frequency of manipulation. As explained below, in this case Plaintiffs have made no factual allegations regarding
the frequency of manipulation, their trading practices in the silver markets (other than a list of days included in
Appendix D to the TAC on which they traded and on which they allege there was suppression of the Fix Price), or
the expected impact of particular manipulative tactics on the market. At bottom, Plaintiffs’ theory appears to be that
the Court can infer from the chat messages and government enforcement proceedings both that the chat messages
are the “tip of the iceberg” and, that given this presumed frequency of manipulation, Plaintiffs must have been
injured.
57
contract types traded on distinct exchanges without a formal rule-based price linkage she will
have to plead in greater detail.”).
As in LIBOR III, Plaintiffs have alleged a “conceivable” theory of actual damages, but
have not alleged a theory that is “plausible” and survives a motion to dismiss. See id. There are
no facts alleged in the TAC that connect Barclays’s, Standard Chartered’s or BNP Paribas’s
episodic manipulation to prices of COMEX futures at all, let alone to Plaintiffs’ alleged trades.
It is a closer case as to UBS and BAML because, buttressed by the CFTC settlements, Plaintiffs
are at least able to connect UBS and BAML to manipulation of the COMEX futures market
generally. Nonetheless, the Court finds the numerous inferences required to connect UBS’s and
BAML’s manipulative conduct to Plaintiffs’ alleged injury (if they suffered any injury at all) to
be too attenuated and speculative to survive a motion to dismiss.
There are no facts alleged in the TAC to connect Barclays to artificial prices in the
COMEX silver futures market, much less to an injury suffered by the Plaintiffs.35 To be sure,
there are adequate allegations that Barclays traders engaged in misconduct, see TAC ¶¶ 263-64,
291-96, but it is entirely guesswork to conclude that those traders’ misconduct included COMEX
silver futures or that their misconduct had any effect in the futures market. None of the chat
35
The shortcomings in the TAC also go to the second and third elements of a CEA manipulation claim:
whether artificial prices existed and whether they were caused by the defendants. As the Court has previously
noted, the elements of a CEA claim are closely related. See Silver I, 213 F. Supp. 3d at 566. Thus, even if the Court
were to find that Plaintiffs alleged actual damages, their claims would fail as to BNP Paribas, Standard Chartered,
and Barclays, both because those Defendants’ conduct is entirely extraterritorial and because the TAC does not
allege that these Defendants caused artificial prices in the COMEX silver futures markets.
For this reason the Court rejects Plaintiffs’ contention that the adequacy of the TAC’s allegations of actual
damages was raised improperly by notice of supplemental authority. See Dkt. 356 at 1 n.1. Although it is true that
the Non-Fixing Banks (inexplicably) did not argue in their opening brief that Plaintiffs had failed to allege actual
damages, they raised the closely related issues of whether Plaintiffs had suffered an injury in fact under Article III
and whether Plaintiffs alleged the elements of a claim for CEA manipulation. See Total Gas & Power N. Am., Inc.,
889 F.3d at 111 (“The ‘actual injury’ analysis looks very similar to the ‘injury in fact’ analysis used to determine
constitutional standing.”). To the extent the issue was not clearly raised by the Non-Fixing Banks’ initial papers, the
Court provided Plaintiffs with an opportunity to file a response. See Dkt. 355.
58
messages involving Barclays indicates the traders planned to manipulate COMEX futures.
Plaintiffs’ theory appears to be that manipulation of any silver-denominated product that is sold
anywhere in the world would necessarily influence the price of COMEX silver futures. See
Opp’n at 36. Acknowledging that the various silver-denominated financial markets are linked,
as Plaintiffs’ econometric analysis demonstrates, does not plausibly lead to the conclusion
Plaintiffs urge—that episodic market manipulation in unspecified silver products, with no factual
allegations related to the frequency or magnitude of the manipulation, necessarily caused
persistent artificiality in prices on COMEX and CBOT. Even assuming Plaintiffs’ allegations
were sufficient to allege that at some point in time Barclays caused artificial prices in the
COMEX or CBOT silver markets, the TAC does not allege the direction of the artificiality, see
Total Gas & Power N. Am., Inc., 244 F. Supp. 3d at 416, or that the artificiality can be connected
to trades by the Plaintiffs.
The chat messages involving BNP Paribas and Standard Chartered also do not support an
inference that their misconduct caused Plaintiffs actual damage. Plaintiffs do not allege
plausibly that BNP Paribas or Standard Chartered caused artificiality in the COMEX silver
markets, much less explain how that artificiality affected trades by the Plaintiffs. The chat
messages involving BNP Paribas and Standard Chartered describe various types of misconduct.
See TAC ¶¶ 236, 297-99, 300, 306-07, 310. But none of the chat messages appears to reference
silver futures or describes a transaction from which the Court could infer any effect at all on the
price of COMEX silver futures. Assuming that Plaintiffs had adequately alleged artificiality, it
would still require additional logical leaps to connect that artificiality to a negative impact on
specific trades by the Plaintiffs. Tellingly, to support their allegations of a connection between
manipulative conduct by BNP Paribas and their injury, Plaintiffs cite only the econometric
59
analysis of the impact of suppression of the Silver Fixing, which is entirely inapposite. See
Opp’n at 31 n.32 (citing TAC ¶¶ 125-98), 32 (citing TAC ¶¶ 143-98); see also Dkt. 356 at 2-3
(citing to Appendix D to the TAC (a list of days of alleged Fix-manipulation)).
Plaintiffs’ claims against BAML (and UBS, as discussed below) present a closer case
because the DOJ Complaint and CFTC orders make it plausible that BAML and UBS
manipulated the COMEX futures markets. The chats contained in the TAC itself are of limited
evidentiary value. Only six chat messages involve BAML traders and most do not reference
silver futures. It is speculative to infer that the traders were discussing manipulation of COMEX
products. Nonetheless, the Department of Justice’s complaint charges BAML traders with
spoofing of COMEX silver futures between 2010 and 2014, and the Department’s Complaint is
supported by a detailed analysis of spoofed orders placed by the traders on specific days during
the class period. BAML Complaint ¶ 18-19. Accepting that those allegations are sufficient for
the Court to conclude that Plaintiffs have alleged the existence of artificial prices in the COMEX
silver futures markets caused by BAML, the series of inferences required to connect that
artificiality to actual damage suffered by Plaintiffs is collectively implausible. First, the Court
would be required to assume that spoofing—or other manipulative conduct that is entirely
unalleged—occurred on more occasions than are alleged in the Department of Justice complaint.
Next, the Court would be required to infer that the artificiality caused by these spoofs altered
market prices for an unspecified period of time. The Court would then need to infer a connection
between the artificiality-of-unknown-duration and a specific trade by Plaintiffs. And finally, the
Court would need to infer that this artificiality moved the market against Plaintiffs’ position. In
isolation the Court might draw any of these four inferences in Plaintiffs’ favor, but collectively
they amount to rank speculation.
60
Plaintiffs’ allegations against UBS require the Court to draw a similar series of
collectively implausible inferences. To begin with, Plaintiffs’ theory requires the Court to infer
that the manipulation described in the chat messages occurred in the COMEX silver futures
markets, despite the fact that the chat messages do not indicate what financial instruments (or
markets) were the subject of manipulation. See TAC ¶¶ 252 (coordinating trading to maximize
market impact), 256-64 (describing manipulative tactics with colorful names). The CFTC
proceedings against UBS and the Department of Justice’s criminal complaint against a UBS
trader who was acquitted make it plausible that at least some of the conduct referenced in the
chat messages occurred in the COMEX futures market or that UBS traders engaged in similar
behavior affecting the COMEX futures market. See TAC ¶¶ 342-44; UBS CFTC Order at 2-3.
But, again, a plausible allegation that UBS manipulated the COMEX silver futures market is
insufficient to allege plausibly that UBS caused Plaintiffs to suffer actual damages. Despite the
fact that the chat messages are time-stamped and that the CFTC UBS Order and the criminal
complaint identify specific dates and times on which alleged manipulation occurred, Plaintiffs
have made no attempt to connect those identified instances of manipulation to artificial prices at
the time of any of their trades.36 Cf. LIBOR II, 962 F. Supp. 2d at 621 (“despite the fact that
plaintiffs indisputably have access to their own Eurodollar futures contract trading records, the
[complaint] is devoid of any references to particular Eurodollar contracts”); Total Gas & Power
N. Am., Inc., 244 F. Supp. 3d at 416 (“[Plaintiffs] have their own trading records, the precise
36
As noted supra note 6, it is possible to cross-reference the chat messages to the list of days in Appendix D
on which Plaintiffs allege they traded. A few of the chat messages occurred on the same day as trades by Plaintiffs.
But the TAC does not connect the chat messages to any specific manipulative trades or to the same markets in which
Plaintiffs traded, and the TAC does not explain whether the impact of market manipulation would have been
persistent such that it could have had an impact on market participants other than the counterparties to the
manipulated transactions. The fact that Plaintiffs may have traded in the same 24 hour period as traders at the NonFixing Banks discussed manipulation of the silver markets is simply too thin a basis for the Court to infer that it is
plausible that the traders’ employers caused the Plaintiffs actual damages.
61
trades that are alleged to have been made in an attempt to manipulate prices . . . .”); CHF LIBOR,
277 F. Supp. 3d at 571(“[Plaintiff] must at minimum provide some details regarding his
transactions that are within his knowledge and bear on the plausibility that the alleged
manipulation caused actual damage to his trading positions.”). Nor have the Plaintiffs included
any other evidence—statistical analyses, discrete examples, or otherwise—to explain the
duration and persistence of artificial prices caused by the relevant manipulative tactics so that the
Court could plausibly infer that episodic manipulation could injure market participants (other
than the counterparties to the manipulative transactions), and that it is more than merely possible
that this impact harmed Plaintiffs (rather than benefiting their positions).
In sum, the TAC fails to allege that episodic manipulation by the Non-Fixing Banks
caused Plaintiffs any actual damages. Because Plaintiffs’ vicarious liability, aiding-and-abetting,
and Rule 180.1 claims rise and fall with Plaintiffs’ primary liability theory, those claims fail as
well. Plaintiffs’ CEA claims against the Non-Fixing Banks are DISMSSED.
III.
Unjust Enrichment
For the reasons stated in Silver I, Plaintiffs’ unjust enrichment claim is DISMISSED.
IV.
Leave to Amend
Under Rule 15(a) of the Federal Rules of Civil Procedure, “[t]he court should freely give
leave” to a party to amend its complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2).
“Leave may be denied ‘for good reason, including futility, bad faith, undue delay, or undue
prejudice to the opposing party.’” TechnoMarine SA v. Giftports, Inc., 758 F.3d 493, 505 (2d
Cir. 2014) (quoting McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007))
(additional citation omitted). Ultimately, “the grant or denial of an opportunity to amend is
within the discretion of the District Court.” Foman v. Davis, 371 U.S. 178, 182 (1962).
62
Plaintiffs have not requested leave to amend, and they have not attached a proposed,
fourth amended complaint for the Court’s review. Given that Plaintiffs have already amended
three times, including based on discovery from Deutsche Bank, and that Plaintiffs have not
requested leave to amend, the Court denies leave to amend. Plaintiffs are represented by
competent, experienced counsel. If they had the facts necessary to plug the holes that exist in the
TAC, the Court is confident those facts would have been included in the pleadings filed to date.
CONCLUSION
The Non-Fixing Banks’ motion to dismiss is GRANTED. Plaintiffs’ claims against the
Non-Fixing Banks are DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to
close the open motion at docket entry 302 and terminate defendants Barclays, Standard
Chartered, BNP Paribas, BAML, and UBS from the case.
The remaining parties are directed to appear for a status conference with the Court at
11:00 a.m. on August 24, 2018. By August 17, 2018, the parties must submit a joint letter of
not more than 5 pages setting forth a proposed schedule for discovery in this action.37 The
parties are forewarned that the Court will not accept dueling letters; the parties are required to
work together to produce a joint letter.
SO ORDERED.
_________________________________
____________________________
_
VALERIE CAPRONI
United States District Judge
Date: July 25, 2018
New York, New York
37
The parties are encouraged to coordinate discovery with the parallel gold fixing case pending before the
Court.
63
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?