A New York federal judge has given her preliminary approval to a $2 billion settlement between nine banks, including JPMorgan Chase & Co. and Citigroup Inc., and investors who say they were victims of manipulation in the foreign exchange market. U.S. District Judge Lorna G. Schofield said that her initial review of the settlement showed that it was up to the standards necessary to move forward. However, the settlement is still the subject of a required fairness hearing.
This approval comes in spite of fund investors who were unhappy with the settlement. They claim that the settlement unfairly cuts them out. Judge Schofield disagreed, finding that the agreements raise no obvious reasons to doubt their fairness.
The settlements included in the broad agreement Judge Schofield ruled on came from the lawsuit filed by investors. It was alleged that JPMorgan Chase, Citigroup, Barclays PLC, HSBC Holdings PLC, The Royal Bank of Scotland PLC, Goldman Sachs Group Inc., BNP Paribas SA, UBS AG and Bank of America Corp. engaged in a broad scheme to rig the $6 trillion foreign exchange market.
The first settlement to be announced came in January when JPMorgan agreed to pay $99.5 million. Since then, UBS AG, UBS Group AG and UBS Securities LLC settled for $135 million in March; Bank of America Corp. and Bank of America NA agreed to pay $180 million in April; and Citigroup and Citibank NA were required to pay $394 million in May. Barclays agreed to pay $384 million. HSBC Holdings will pay $285 million and BNP Paribas agreed to a $115 million contribution to the settlement funds.
RBS will pay $255 million and Goldman Sachs will pay $135 million if the settlement gets final approval. In May, Barclays, Citigroup, JPMorgan, RBS and UBS were part of a broader $5.6 billion settlement with U.S. and U.K. authorities. Of those five banks, only UBS was able to avoid a guilty plea to criminal charges of alleged foreign exchange manipulation. Each of the class action settlements included a cooperation agreement.
It appears that Judge Schofield has given careful scrutiny to the proposed settlements. The judge asked for details regarding damages to determine whether the $2 billion combined payout was enough to remedy the violations. The settlement has also gotten the attention of some employee retirement funds that say their claims under the Employee Retirement Income Security Act were not properly addressed in the deal. Even if Judge Schofield provides final approval of the settlement, there is still potentially a long way to go.
The Plaintiffs still have claims outstanding against Morgan Stanley, Credit Suisse AG and Deutsche Bank AG, which were in the original group of banks that were sued. Those Defendants continue to fight the class claims. Japan’s Bank of Tokyo-Mitsubishi, Canada’s RBC Capital Markets LLC, France’s Societe Generale SA and Britain’s Standard Chartered PLC were added as additional defendants in July. That brought the number of banks that were sued in the litigation to 16.
The Plaintiffs are represented by David R. Scott, Christopher M. Burke, Kristen M. Anderson, Sylvia M. Sokol, Walter W. Noss and William C. Fredericks of Scott & Scott LLP, and Michael D. Hausfeld, William P. Butterfield, Reena A. Gambhir, Timothy S. Kearns and Nathaniel C. Giddings of Hausfeld LLP. The case is In re: Foreign Exchange Benchmark Rates Antitrust Litigation, which is in the U.S. District Court for the Southern District of New York.
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