Investment management firm Pimco will pay $92 million to settle claims that it manipulated the U.S. bond market in 2005. The class-action lawsuit was filed in Chicago by Breakwater Trading and two investors who alleged that Pimco – the Pacific Investment Management Co. of Newport Beach, Calif. – had created an “artificial scarcity” in ten-year treasury notes.
The Plaintiffs had bet short on futures contracts that were tied to the Treasury notes. It was alleged in the Complaint that Pimco’s “motive and intent for their foregoing manipulative act was to increase their financial return, including but not limited to, the return from the sale of their treasury notes futures positions at the artificially high prices created by their manipulations.” Interestingly, Pimco claimed that all of the trades were properly designed to secure the best execution for its clients. The settlement is still subject to court approval.
Source: Los Angeles Times and New York Times
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