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A Lawsuit Accuses Wall Street Banks Of Sharing Client Info In Chat Rooms In An Effort To Rig Treasury Auctions

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A new lawsuit has picked up old accusations about how top Wall Street Banks rigged Treasury Auctions to up their profits at the expense of clients, including public workers who were building pensions and retirees. Bankers reportedly shared top-secret client information in online chat rooms to get a better estimate of where the market was at during the volatile years bookending the Great Recessions, from 2007 through 2015. There was a class action suit two years ago that never went far — until now, for new evidence has been introduced through secret informants on the inside of the scam.

The banks accused include Goldman Sachs, Morgan Stanley, the Royal Bank of Scotland, BNP Paribas, and UBS, as well as others. One of the banks sued in the previous lawsuit has now turned on its former conspirators and is working with plaintiffs on this new case. While this is still just a class action lawsuit, the Justice Department, Securities and Exchange Commission, and industry regulators have gotten involved and are now performing separate inquiries into the activities of the banks in question.

The scam worked worked like this — bankers shared information on the prices at which clients wanted to buy into the Treasuries market. And based on that pool of information, they were able to force prices higher or lower at times of greater or lesser demand. Essentially, they were able to preview the market and adjust prices accordingly, which cost their clients more money and delivered fatter profits to bankers. The new lawsuit has more details on how exactly the bankers went about fixing bids than the previous case filed two years ago.

It’s unclear what mechanisms might be put in place to prevent this kind of weighing of the scales in the future. The Trump administration has been actively dismantling finance regulations, including the Dodd-Frank act put in place after the housing bubble burst and sparked the recession. While these bankers may very well see serious consequences from this lawsuit, other members of the profession could be whipping up a fresh scheme to work a system with even fewer safeguards.

(Via New York Post)

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