Tuesday, January 18

14 years after the fact, CompCom’s rand manipulation case is nowhere near a conclusion

The question before the Competition Court this week was whether 28 local and foreign banks had a case to answer for their alleged manipulation of the rand, as of 2007.

That was 14 years ago, and the Competition Commission cannot say for sure whether the “widespread conspiracy” among bank merchants to manipulate the rand has come to an end.

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Read: Rand manipulation investigator alleges widespread currency collusion [2015]

The Competition Commission started its case in 2015, and since then there have been two rounds of arguments before the Competition Court: in 2018 and 2021, when the accused banks argued their objections and ‘exceptions’ to the commission case.

These are all technical arguments, even before the merits of the case have been argued, suggesting that we are nowhere near a conclusion of the case. A trial date has not yet been set, when the banks, their executives and forex traders can be questioned about their knowledge and role in the alleged conspiracy.

Last week’s arguments marked another icy step in what may turn out to be the longest and most complex case in the court’s history.

The banks’ legal representatives argued, for the second time in three years, why the Competition Commission’s case should not succeed.


Currency manipulation case against 20 banks suffered a setback
CompCom wants authority over non-South African banks

The commission argues in its court documents that merchants from competing banks were invited to join Bloomberg chat rooms such as Old Gits and ZAR, where they received help from other merchants to make a profit, reduce risk and avoid losses when they were engaged in trading. currency with the USD / ZAR currency pair.

As Moneyweb previously reported, it is alleged that merchants from participating banks have been in frequent and regular contact and communication with merchants from other banks via Bloomberg chat rooms to coordinate their business activities, provide information to each other, and reach out to an understanding of business strategies.

Read: The dark and ‘smoky’ chat room that could sink rogue forex traders

The commission recently expanded the number of banks believed to be part of the conspiracy from 19 to 28.

He has asked the court to join the 28 banks in the lawsuit and dismiss the banks’ objections and exceptions.

Read: 28 banks now targeted for rand manipulation case

One can only guess what this case is costing the banks in terms of legal bills. Some of the top silks in the country have been recruited to crack down on the commission’s case, and they appear to have made a good chunk of their money in the past week.

For a time it appeared that the commission was on the ropes, as the banks argued that its case was vague, lacked details and, in some cases, jurisdiction.

But the commission’s spokesman, Siyabulela Makunga, tells Moneyweb that he is confident that his case will prevail and that the court will agree with him that there was a widespread conspiracy to manipulate the rand.

While bank attorneys may have painted their clients as saints, there is a long history of currency and bond market manipulation involving many of the world’s largest banks.

It takes credulity to believe that merchants from competing banks would be invited to join the chat rooms for totally innocent purposes, and that’s the challenge the commission faces: proving a conspiracy based on evidence comprising 158 conversations between 28 participating banks over a period of time. seven years. .

Ambitious company

Some Moneyweb readers have written their horror stories at the hands of local bank forex departments, but putting all of this together in a conspiracy case is an ambitious project, as some of the banks’ lawyers pointed out this week.

Here is a list of some recent market manipulation cases against some of the world’s leading banks:

  • In 2017, Citibank agreed to pay an administrative fine of R69.5 million for its involvement in the currency manipulation case and to cooperate with the commission to prosecute other banks.
  • In 2019, the New York Department of Financial Services (DFS) fined Standard Chartered Bank $ 40 million (R635 million) for attempting to manipulate transactions in the currency markets between 2007 and 2013. The offending chat room in that case was ‘Old Gits’, which featured prominently in the arguments before the Competition Court this week . This chat room was described by one member as “a den of thieves” in the case of New York.
  • This follows previous fines totaling $ 3.14 billion that New York has imposed on Barclays Bank, BNP Paribas, Credit Suisse, Deutsche Bank and Goldman Sachs to resolve illegal conduct in the currency trading business.
  • In May 2021, the EU imposed fines of 371 million euros (6.6 billion rand) on Nomura, UBS and UniCredit for violating EU antitrust rules by participating in a European government bond cartel. Also in 2021, Bank of America Merrill Lynch, Credit Agricole and Credit Suisse they were slapped with 28.5 million euros (R509 million) fine for similar cartel conduct in bond markets.
  • In 2019, the EU imposed fines of € 1.07 billion (R19.1 billion) on five banks – Barclays, Royal Bank of Scotland, Citigroup, JPMorgan and MUFG (formerly Bank of Tokyo-Mitsubishi) – for conspiring to manipulate the markets of spot currencies. .

As the banks argued

Credit Suisse representative Michelle Norton says the commission has alleged a conspiracy of unlimited scope. The damage is alleged to have occurred in chat rooms, but there is nothing in their affidavit of reference to suggest that all of the conversations were sinister. He argued that the complaint against Credit Suisse should be dismissed.

It was pointed out to the court that traders are sometimes buyers and sellers of a currency pair and are therefore wrongly classified as competitors, when in fact they are counterparties in a trade. What is prohibited by law is setting a price with the aim of eliminating competition.

Mark Wesley, defending RMB, said the commission could not establish RMB’s involvement in the single global conspiracy (SOC), while the commission’s heads of argumentation suggest that engaging in a chat does not in itself establish a SOC. . Without this, there could be no cases against RMB. He also argued that the complaint against RMB should be dismissed.

Frank Snyckers, Standard Chartered Bank’s legal counsel, argued that the commission’s case assumed there was a large snake, signifying a large conspiracy, however, the details of their claim show that the top alleged collaborators only represented a maximum of five banks. The commission ambitiously bet that the court would allow them to get away with arguing that all 28 banks were involved in a conspiracy, when their arguments do not support this.

One question to be asked was what do the banks get out of a conspiracy as suggested by the commission? “Yes, if there is a conspiracy, they get less volatility than would occur if there was a competitive agreement; otherwise, they get nothing, “Snyckers said.

Other legal representatives of the banks attacked the alleged lack of evidence presented by the commission.

In one case, the commission mentions a 53-second window when currency prices were set, and in other cases, the talks occurred on a Sunday afternoon or early Monday. The banks have seized on what they perceive as a lack of specific details pointing to a conspiracy, as well as vague allegations and unidentified conspirators who were allegedly involved in the game.

There seems to be little doubt that the case will go ahead, perhaps minus one or two of the banks claiming to be part of the conspiracy. But don’t expect a conclusion anytime soon.


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