Gold Manipulation DB Et Al Full

8/12/2019 Gold Manipulation DB Et Al Full

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Case 1:14-cv-05153-VEC Document 2 Filed 07/09/14 Page 1 of 35


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gold derivative contracts, including COMEX gold futures contracts and options on futures

contracts. Defendants engaged in this conspiracy for the purposes of profiting from this

manipulation, both individually and collectively.

3. As alleged below, these practices included pre-fix and post-fix calls among

Defendants, other collusive conduct, and individual manipulative conduct by Defendants. E.g.,

74-83, infra.

4. This joint and individual conduct caused substantial harm to Plaintiff on June 28,

2012 (see 6 infra) and to Plaintiff and other persons holding or transacting in physical gold and

gold derivative contracts, including COMEX gold futures and options on many other days.

5. Because Defendants intentional conduct was carried out with the intent to

artificially fix prices of gold and gold derivatives, this conduct isper se unlawful.

I. PARTIES

A. Plaintiff

6. Plaintiff Derksen is a resident of Oregon. During the Class Period, Plaintiff

purchased and sold COMEX gold derivatives including options on futures contracts. On June

28, 2012 in particular, Plaintiff held a long position in ten August 2012 gold call options that was

negatively affected by the downward manipulation by Defendant Barclays Plc of the London Fix

and physical gold prices. See68-73, infra. As a general matter, Plaintiff tended to hold long

COMEX gold call positions during the Class Period. Because of Defendants manipulation,

Plaintiff transacted at artificial prices and/or in an artificial market.

B. Defendants

7. Defendant Bank of Nova Scotia (BNS), doing business as Scotiabank

(Scotiabank) is a Canadian public company with headquarters in Toronto, Ontario, Canada.



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Defendant Scotiabank is licensed by the New York Department of Financial Services with a

registered address at One Liberty Plaza, 22nd-26th Floors, New York, NY 10006. Defendant,

through its broker-dealer affiliate The Bank of Nova Scotia, actively traded COMEX gold

futures and options contracts during the Class Period.

8. Defendant Barclays Bank plc (Barclays) is a British public limited company

with headquarters at 1 Churchill Place, London E14 5HP, England. Barclays is licensed by the

New York Department of Financial Services with a registered address at 745 Seventh Avenue,

New York, NY 10019, and a foreign representative office at One MetLife Plaza, 27-01 Queens

Plaza North, Long Island City, New York 11101. Defendant, through its broker-dealer affiliate,

Barclays Capital Inc., actively traded COMEX gold futures and options contracts during the

Class Period.

9. Defendant Deutsche Bank AG (DB) is a German financial services company

headquartered in Frankfurt, Germany. DB is licensed by the New York Department of Financial

Services with a registered address at 60 Wall Street, New York, NY 10005. Defendant, through

its broker-dealer affiliate, Deutsche Bank Securities Inc., actively traded COMEX gold futures

and options contracts during the Class Period.

10. Defendant HSBC Holdings plc (HSBC) is a British public limited company

headquartered in London at 8 Canada Square, London E14 5HQ, England. HSBC has numerous

subsidiaries in the United States, including HSBC Bank U.S.A., N.A., the principal subsidiary of

HSBC U.S.A. Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc.

HSBC, through its broker-dealer affiliate, HSBC Securities (USA) Inc., actively traded COMEX

gold futures contracts during the Class Period. Defendant HSBC, through its broker-dealer



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affiliate, HSBC Securities (USA) Inc., actively traded COMEX gold futures and options

contracts during the Class Period.

11. Defendant Socit Gnrale (SocGen) is a public banking and financial services

company headquartered in Paris, France. Defendant SocGen is licensed by the New York

Department of Financial Services with a registered address at 1221 Avenue of the Americas,

New York, NY 10020. Defendant SocGen, through its broker-dealer affiliate, held by virtue of a

joint venture with Credit Agricole CIB, NewEdge USA, LLC, actively traded COMEX gold

futures and options contracts during the Class Period.

12. During the Class Period, Defendants BNS, Barclays, DB, HSBC, and SocGen

owned and were fixing members of the London Fix, were gold dealers, and bear responsibility

for the alleged acts of their employees and the conduct and planning of the London Fix.

II. CO-CONSPIRATORS

13. In addition, various other entities and individuals unknown to Plaintiff at this time

participated as co-conspirators in the acts complained of, and performed acts and made

statements that aided and abetted and were in furtherance of, the unlawful conduct alleged

herein.

14. Each of these unknown parties acted as the agent or joint venture of or for the

named Defendants with respect to the acts, violations, and common course of conduct alleged

herein.

15. Whenever in this Complaint reference is made to any act, deed, or transaction of

any corporation, the allegation means that the corporation engaged in the act, deed, or transaction

by and/or through its officers, directors, agents, employees, or representatives while they were



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actively engaged in the management, direction, control, or transaction of the corporations

business or affairs.

III. JURISDICTION AND VENUE

16. Plaintiff brings this action under Section 22 of the Commodity Exchange Act, 7

U.S.C. 25, to recover actual damages suffered as a result from Defendants violations of the

Commodity Exchange Act and CFTC Rule 180.1(a).

17. Plaintiff also brings this action under Section 4 of the Clayton Act, 15 U.S.C.

15, to recover treble damages and costs of suit, including reasonable attorneys fees, against

Defendants for the injuries that Plaintiff and the other Class members have suffered from

Defendants violations of Section 1 of the Sherman Act (15 U.S.C. 1).

18. This Court has subject matter jurisdiction over this action pursuant to Sections 4

and 16 of the Clayton Act (15 U.S.C. 15(a) and 26) and pursuant to 28 U.S.C. 1331 and

1337(a). The Court also has jurisdiction pursuant to 28 U.S.C. 1332(d) and the Class Action

Fairness Act of 2005 (CAFA), 28 U.S.C. 1711, et seq., which vests original jurisdiction in

the district courts of the United States for any multi-state class action where the aggregate

amount in controversy exceeds five million dollars and where the citizenship of any member of

the class of is different from that of any Defendant. The five million dollar amount-in-

controversy and diverse-citizenship requirements of CAFA are satisfied in this case.

19. Venue is proper in this District pursuant to 15 U.S.C. 15(a) and 22 and 28

U.S.C 1391(b), (c) and (d) because during the Class Period, all the Defendants resided,

transacted business, were found, or had agents in this District; a substantial part of the events or

omissions giving rise to these claims occurred in this District; and a substantial portion of the

affected interstate trade and commerce discussed herein has been carried out in this District.



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This Court has personal jurisdiction over each Defendant, because each Defendant transacted

business throughout the United States, including in this District; and dealt with Class members

throughout the United States, including Class members residing or located in this District; had

substantial contacts with the United States, including in this District; and/or committed overt acts

in furtherance of their illegal scheme and conspiracy in the United States. In addition, the

conspiracy was directed at, and had the intended effect of, causing injury to persons residing in,

located in, or doing business throughout the United States, including in this District.

20. Venue is proper in this District pursuant to Section 22 of the Commodity

Exchange Act, 7 U.S.C. 25, because one or more Defendants resides or is found in the District.

Defendants unlawful acts allegedly manipulated the prices of COMEX gold futures and options

contracts that were traded on COMEX, a designated contract market located in this district at

One North End Avenue, New York, New York.

IV. INTERSTATE COMMERCE

21. The activities of Defendants and their Co-Conspirators were within the flow of,

were intended to, and did have a substantial effect on the foreign and interstate commerce of the

United States.

22. Defendants made use of the means and instrumentalities of transportation or

communication in, or the instrumentalities of, interstate commerce, or the mail in connection

with the unlawful acts detailed in this Complaint.

23. Defendants each engage in substantial business activities in the United States that

affect billions of dollars of commerce in gold and gold derivatives.



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V. CLASS ACTION ALLEGATIONS

24. Plaintiff, on behalf of himself and all similarly situated putative Class members,

seek damages against Defendants based on allegations contained herein.

25. Plaintiff brings this action on behalf of himself and, under Federal Rule of Civil

Procedure 23(a) and (b)(3), as a representative of a Class defined as follows:

All persons or entities in the United States and its territories that,from January 1, 2004 to the present, held or transacted in physicalgold, or gold derivatives that settled or were marked-to-marketbased on the London Fix, or held or transacted in COMEX goldfutures or options contracts. Excluded from the Class areDefendants, their co-conspirators, and their officers, directors,

management, employees, subsidiaries, or affiliates, and all federalgovernmental entities.

26. Numerosity. Members of the Class are so numerous that joinder is impracticable.

Plaintiff does not and cannot not know the exact size of the Class at present, but believes that

there are hundreds of Class members geographically dispersed throughout the United States.

27. Typicality. Plaintiffs claims are typical of the claims of the members of the Class.

Plaintiff and all members of the Class were damaged by the same wrongful conduct of

Defendants.

28. Plaintiff will fairly and adequately protect and represent the interests of the Class.

The interests of Plaintiff are coincident with, and not antagonistic to, those of the Class.

Accordingly, by proving its own claims, Plaintiff will prove other Class members claims as

well.

29. Adequacy of Representation. Plaintiff is represented by counsel experienced and

competent in the prosecution of class action antitrust litigation. Plaintiff and its counsel have the

necessary financial resources to adequately and vigorously litigate this class action. Furthermore,

Plaintiff can and will fairly and adequately represent the interests of the Class and has no



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interests that are adverse to, at conflict with, or antagonistic to the interests of the Class. Plaintiff

understands and appreciates his duties to the Class under Rule 23 of the Federal Rules of Civil

Procedure, is determined to diligently discharge those duties, and is committed to vigorously

protecting the rights of absent Class members.

30. Predominance. Questions of law and fact common to the members of the Class

predominate over questions that may affect only individual Class members because Defendants

have acted on grounds generally applicable to the entire Class, thereby making overcharge

damages with respect to the Class as a whole appropriate. Such generally applicable conduct is

inherent in Defendants wrongful conduct.

31. Commonality. There are questions of law and fact common to the Class. Such

questions relate to the existence of the conspiracy alleged, and the type and common pattern of

injury sustained as a result thereof, including, but not limited to:

a. whether Defendants and their co-conspirators conspired among themselves and/or

with others to manipulate prices of gold and gold derivative contracts;

b. whether Defendants and their co-conspirators manipulated prices of gold

derivative contracts;

c. the duration of the conspiracy alleged in this Complaint and the nature and

character of the acts performed by defendants and their co-conspirators in furtherance of

the conspiracy;

d. whether the alleged conspiracy violated Section 1 of the Sherman Act;

f. whether the conduct of defendants and their co-conspirators, as alleged in this

Complaint, caused injury to the business and property of Plaintiff and other members of

the Class;



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g. the appropriate measure of damages sustained by Plaintiff and other members of

the Class.

32. Superiority. Class action treatment is a superior method for the fair and efficient

adjudication of the alleged controversy. Such treatment will permit a large number of similarly

situated, geographically dispersed persons or entities to prosecute their common claims in a

single forum simultaneously, efficiently, and without the unnecessary duplication of evidence,

effort, or expense that numerous individual actions would engender. The benefits of proceeding

through the class mechanism, including providing injured persons or entities a method for

obtaining redress on claims that could not practicably be pursued individually, substantially

outweigh potential difficulties in management of this class action.

33. Plaintiff knows of no special difficulty to be encountered in the maintenance of

this action that would preclude its maintenance as a class action.

VI. FACTUAL ALLEGATIONS

A. The London Fix and the Market for Gold

34. Gold is a commodity as defined by the Commodity Exchange Act, 7 U.S.C.

1(a)(4). Gold also serves as the commodity underlying derivative contracts, including gold

futures and gold options traded on COMEX, a designated contract market located in New York,

NY under Section 22 of the Commodity Exchange Act, 7 U.S.C. 25.

35. Gold is the most popular precious metal for investors worldwide.2 The World

Gold Council estimates that the investable gold market, as of 2010, was approximately $2.4

trillion.3

2 http://www.investopedia.com/features/industryhandbook/metals.asp

3 http://www.exchangetradedgold.com/media/ETG/file/liquidity_in_the_global_gold_market.pdf



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Each of the remaining members declares whether they are a net buyer or net seller at the

proposed price. If there are no buyers or sellers at a given price, the chair will move the price

until there are both buyers and sellers.

42. At that point, the auction moves to a secondary phase, where buyers and sellers

identify the quantity of gold they would be buying or selling at the specified price. These

quantities are specified in increments of five bars.6 The Chair will increase the price if the net

purchases of gold would be 50 bars greater than the net sales at the price, and reduce it if the net

sales would be 50 bars greater than the net purchases.

43. This process continues for an indefinite period of time, usually in the range of 5-

15 minutes, until the quantities are balanced to within 50 bars, each bar being specified as

between 350 and 430 troy ounces7 of gold with a minimum fineness of 995.0 parts per thousand

fine gold.8

44. Once the difference is 50 bars or less, the Chair may declare the price fixed and

the banks will split the difference pro rata among themselves.9 This pro rata arrangement is

purely between the banks and will not affect their underlying customer orders.10

45. Once the Chair declares the price to be fixed, the fixing price is published

immediately by various news agencies.11

6 https://www.goldfixing.com/how-is-the-price-fixed/7 One troy ounce is exactly 31.1034768 grams. Each COMEX futures contract is a contract forfuture delivery of 100 troy ounces with a minimum fineness of 995 parts per thousand fine gold.

8 http://www.lbma.org.uk/pages/index.cfm?page_id=27

9 https://www.goldfixing.com/how-is-the-price-fixed/

10Id.

11 London Bullion Market Association and The London Platinum and Palladium Market, AGuide to the London Precious Metals Markets at 15 (Aug. 2008), available at:http://www.lppm.com/otcguide.pdf



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46. London Fix members trade other gold-related instruments during the London Fix

teleconference. In this way, the members and/or their affiliates can leverage their critical

foreknowledge - that the price is virtually certain to move in accordance with the fixing - to trade

derivatives to the disadvantage of Plaintiff and the Class. Similarly, like in the instance of

LIBOR-rigging, Defendants knowledge impelled them to adjust and coordinate their statements

and actions during the London Fix based on how their own derivatives positions would benefit or

suffer from the outcome of the fixing.

B. Gold Derivatives COMEX Futures and Options.

47. Derivatives are financial instruments, the value of which is tied to the underlying

net worth, performance or value of another asset. Derivative contracts include, among other

things, contracts for sale of a commodity for future delivery (typically referred to as futures

contracts) and options on such contracts. Both futures contracts and options are regulated by the

Commodity Futures Trading Commission (CFTC).12

48. Futures contracts are required to be traded on exchanges. These exchanges are

known as designated contract markets.13

49. COMEX (Commodity Exchange, Inc.) is a designated contract market located in

New York, New York. COMEX has been owned and operated by the CME Group since 2008.14

COMEX offers a platform for trading of gold futures and options contracts, as well as contracts

in other metals such as silver and copper. 15

12See 7 U.S.C. 2(a)(1)(A).

13See 7 U.S.C. 7.

14See http://investor.cmegroup.com/investor-relations/releasedetail.cfm?ReleaseID=329722

15 http://www.cmegroup.com/product-codes-listing/comex-market.html



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50. Among these gold derivative contracts, COMEX offers standardized gold futures

contracts with delivery dates commencing with the next calendar month, and potentially

extending as far as 72 sequential months into the future, depending upon the month in which the

contract was executed. The number of gold futures contracts trading at any given time varies.

Trading is conducted for delivery during the current calendar month; the next two calendar

months; each February, April, August, and October within a 23-month period; and any June and

December falling within a 72 month period beginning with the current month. The two most

immediate expirations are called front months. Front month contracts are the most actively

traded gold futures.

51. A gold futures contract is an agreement to buy or sell gold in the amount specified

as a term of the contract. The COMEX specifies the terms of trading, including the trading units,

price quotation, trading hours, trading months, minimum and maximum price fluctuations and

margin requirements.16 The contract size for gold futures is 100 troy ounces, with minimum

quality specifications of 995 fineness. The minimum price fluctuation for gold futures

contracts is $0.10 per troy ounce. Prices of gold futures are quoted in dollars and cents per troy

ounce.

52. Trades of COMEX gold futures contracts have two sides. The long side

represents the buyer of a contract who is obligated to pay for the gold and take delivery. The

short side represents the seller of a contract who is obligated to receive payment for the gold

and make delivery. If a market participant holds its position to the end of the settlement period

for a gold futures contract, the market participant is obligated to go to delivery. Once the

16See, e.g.,

http://www.cmegroup.com/trading/metals/precious/gold_contract_specifications.html



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settlement date is reached, the futures contract for a particular month becomes a bilateral contract

to pay for and deliver physical gold pursuant to the individual contract specifications.

53. The gold futures contracts for the current delivery month terminate trading on the

third last business day of the delivery month. On this day, physical delivery of the gold must

occur, with the long futures holders receiving the gold at specified locations, and those on the

short side delivering the gold to those locations.

54. No trades in gold futures deliverable in the current delivery month are made after

the third last business day of that month. Any contracts remaining open after the last trade date

are either: (a) Settled by delivery which shall take place on any business day beginning on the

first business day of the delivery month or any subsequent business day of the delivery month,

but no later than the last business day of the delivery month; or (b) Liquidated by means of a

bona fide Exchange for Related Position (EFRP) pursuant to CME Rule 538.17

55. If delivery occurs, the entity delivering the gold must provide the gold from a

CME-approved producer bearing the one or more of the CMEs approved brand marks, assayed

by approved assayer, and delivered with a licensed depository within a 150-mile radius of the

City of New York.

56. Gold futures prices for active months not going to delivery settle on a daily basis

(and at final settlement) based on exchange activity between 13:29:00 and 13:30:00 Eastern

Time (ET). The active month is the nearest base contract month that is not the current delivery

17See, e.g., CME Rulebook Chapter 113, Gold Futures, available at:

http://www.cmegroup.com/rulebook/NYMEX/1a/113.pdf(An EFRP is permitted in an expiredfutures contract until 12:00 p.m. on the business day following termination of trading in theexpired futures contract. An EFRP which establishes a futures position for either the buyer orthe seller in an expired futures contract shall not be permitted following the termination oftrading of an expired futures contract.)



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month. The base months for gold futures are February, April, June, August and December. The

COMEX determines pricing according to the following schedule.

a. Tier 1: If a trade(s) occurs on Globex (the electronic platform) between

13:29:00 and 13:30:00 ET, then the contract month settles to the volume-

weighted average price (VWAP), rounded to the nearest tradable tick.

b. Tier 2: In the absence of outright trades during the settlement window, the

active month settles to the best bid or ask in the expiring contract at market

close that is nearest to the last traded price.

c. Tier 3: If there is no bid or ask in the expiring contract at that time, then the

settlement price is implied from the bid/ask in the active spread at the close of

the market.18

57. Few COMEX futures contracts result in actual delivery of the underlying

commodities. Traders generally use futures contracts as a hedging mechanism or to speculate on

movements in the price of a commodity and enter offsetting trades prior to their expiration. For

example, a purchaser of a gold futures contract can cancel or offset his future obligation to the

contract market/exchange clearing house to take delivery of gold by selling an offsetting futures

contract. The difference between the initial purchase or sale price and the price of the offsetting

transaction represents the realized profit or loss.

58. Gold options on futures contracts are also traded on COMEX.19 There are two

types of options calls and puts. A call option gives the holder of the gold option the opportunity

to purchase the underlying futures contract at a certain price, known as the strike price, until the

18See http://www.cmegroup.com/trading/metals/files/daily-settlement-procedure-gold-

futures.pdf19

See http://www.cmegroup.com/trading/metals/precious/gold_contractSpecs_options.html



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date that the option expires. Accordingly, if the price of the futures contracts trading on

COMEX exceeds the strike price, a call will typically be exercised as in the money. A put

option guarantees the holder the opportunity to sell an underlying futures contract at the strike

price until the date that the option expires. A put option is purchased when the party expects

prices in the underlying contract to fall (analogous to a short position on a futures contract); a

call option is purchased when the purchaser expects prices in the underlying contract to rise

(analogous to a long position on a futures contract).

C. The Relationship Between the London Fix and the Price of Gold Derivatives.

59. Futures trading allows a trader to hedge against a change in the price of the

underlying commodity in the future, or to speculate on future prices of such commodity with the

intention of making a profit.

60. Futures contracts rarely result in physical delivery. As the United States Court of

Appeals for the Eight Circuit noted in Cargill, Inc. v. Hardin, 452 F.2d 1154, 1172-73 (8th Cir.

1971):

While the obligation to make or take delivery is a bona fide featureof the futures contract, in reality the futures market is not analternative spot market for the commodity itself, and indeed thefunctions performed by the futures market would probably beseverely hampered if it were turned into an alternative spot market.Most parties who engage in futures transactions are in no positionto either make or take delivery, and if they were required to alwaysmake preparations to fulfill their obligations to make or takedelivery, the number of persons who could effectively participatein the futures market would be substantially restricted, thusreducing the liquidity and volume of that market. The maineconomic functions performed by the futures market are thestabilization of commodity prices, the provision of reliable pricinginformation, and the insurance against loss from price fluctuation.The functions can be fulfilled only if both longs and shorts can beassured that they can offset their contracts at non-manipulatedprices.



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61. Nonetheless, the spot or physical market prices are intimately related to the prices

on the futures markets. This is because the futures price and the spot market prices converge

at the time of delivery. The convergence is the result of the futures contract converting at the

point of delivery to physical gold at a licensed depository near the City of New York. Thus, for

those taking delivery on a gold futures contract (i.e., the long contracts of the nearby delivery

month), the price at which they can sell the gold that they receive will be the spot (physical)

price of gold.

62. The futures price is thus the markets consensus of the expected spot price for the

underlying physical commodity at a specified future date. Because the futures price is nothing

more than an expectation of the future spot price, both futures and physical prices must be and

are, in fact, directly correlated.

63. For example, if the futures price in a contract negotiated today for delivery next

month starts to rise, this indicates that the market believes spot prices will rise next month. The

rise in the future price for delivery next month will cause a reaction today among producers and

consumers of the commodity.

64. The following chart demonstrates how the marked strong influence that the

London Fix has as a key daily event in the development of the prices of physical gold would

equally affect COMEX gold futures prices. In fact, from January 2010 until December 2013, the

end of day physical gold prices and the end of day prices of the COMEX gold futures contract

had a correlation coefficient of approximately 97%, with average price spreads of only 0.15% (or

0.0015) and average return spreads of 0.22% (or 0.0022).



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65. Even the correlation of the 1-minute average intraday returns of physical gold and

COMEX gold futures was very strong at approximately 78%. The following chart of average

intraday gold price shows the same strong relationship between the physical gold and the

COMEX gold futures markets.

800

1000

1200

1400

1600

1800

2000

Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13

Priceper

troyoz.,

USD

Gold Spot and Futures Prices: 2010-2013

Spot Futures

998.6

998.8

999

999.2

999.4

999.6

999.8

1000

100 0.2

1000.4

1000.6

Normalizedfuture

spricepertroyoz.,

base=1000USD

London time

Average Normalized Gold Prices: Jan 2010 - Dec 2013

Futures

Physical

AM Fixing

PM Fixing



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D. Defendants Unlawful Conduct

66. Plaintiff alleges that from approximately January 1, 2004 to the present,

Defendants manipulate the prices of gold and gold derivatives contracts on their own and

combined, conspired, and agreed with one another and unnamed co-conspirators to manipulate

the prices of gold and gold derivatives contracts.

67. This agreement was intended to permit each Defendant individually and all

Defendants collectively to reap profits from their foreknowledge of price movements in the gold

market.

1. Barclays Fined 26 Million for Trader Manipulation of London Fix

68. On May 23, 2014 the UKs Financial Conduct Authority (FCA) fined Barclays

the equivalent of $44 million for failing to manage conflicts between itself and customers

relating to the London Fix from 2004-2013.

69. The FCA also fined a Barclays trader, Daniel James Plunkett, 95,000 for

influencing the June 28, 2012, 3pm London Fix in order to avoid paying a Barclays customer

$3.9 million on a digital option (an option with an all-or-nothing style payoff) expiring on June

28, 2012 that would force the bank to pay the client if the fixing price was above $1,558.96. As

a direct result of the traders manipulative efforts, the 3pm London Fix was set at $1,558.50, a

mere $.46 below the options strike price.

70. As illustrated in the chart below, the Barclays traders manipulation of the

London Fix price had a clear impact on the spot market prices of gold.



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71. The above chart shows a sharp decrease in the price of physical gold immediately

following the start of the fixing call. This is indicative of Barclays overstating the amount of sell

orders on its book in order to force the fixing price downwards. As this information was leaked

into the market, a large suppression in gold prices is observed. Following this initial

suppression, there was a temporary recovery in the market before another sharp decline in prices

towards the options strike price. This is consistent with Barclays making a concerted effort to

ensure that the fixing price was set below the options strike price.

72. The fixing price does not correspond precisely to the market level at the end of

the fixing call because the auction is based on the members order books and not on actual

market transactions. As such, there is a lag in market prices until the fixing information is leaked

(during the call) or released (after the call) to the market.

73. On June 28, 2012, Plaintiff held a long call option position that was negatively

impacted by Barclays manipulative conduct.



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2. Defendants Illicitly Shared Information With One Another Prior to the

London Fix and Entered Spoof Orders to Move Prices In Their Favor

74. Based upon Plaintiffs Counsels factual, economic and other investigation,

Plaintiff has good grounds to believe and does allege as follows.

75. Between at least 2004 and at least late 2013, traders employed by Defendants and

involved in the London Fix typically or frequently had, during the minutes before the London

Fix commenced, joint communications with one another via various means including one-on-one

private chat rooms.

76. During such pre-Fix communications, the Defendant banks repeatedly shared

information with one another about significant orders or intentions of one anothers customers.

77. These communications frequently entailed one Defendant divulging to one or

more other Defendants specific large amounts that were to be purchased or sold by such

Defendants customer during the London Fix. Such specific disclosures ranged from 10,000 to

100,000 ounces to be purchased or sold by a given Defendants customer during the London Fix.

78. In addition to divulging specific facts concerning customer orders, such pre-Fix

communications frequently included discussions of, or advice as to, what steps the Defendants

should take during the London Fix so as to mutually profit themselves from the order flow.

These discussions included simple advice, such as do not get in the way of the orders that a

Defendant would be submitting. Such discussions also included active steps that could be taken

by Defendants to profit from the order flow.

79. Based on these pre-call communications, Defendants collusively adjusted and

coordinated their conduct during the London Fix in order to profit and/or avoid losses for

themselves at the expense of the market, including their clients.



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80. Separate and apart from this aspect of Defendants pre-Fix collusion, Defendants

also, collectively or individually, or working with large customers of a Defendant, engaged in

communications prior to and during the London Fix that were intended to move and manipulate

gold prices in order to profit one or more of Defendants or their customers.

81. Such communications included placing, just prior to the London Fix, during the

London Fix, at the London Fix, and/or after the London Fix, large orders for COMEX gold

futures contracts on the Globex trading platform for which there was no intention of execution.

82. These spoof orders were designed to move the market prices just prior to the

Fix, during the Gold Fix, at the Fix, and/or after the Fix, so as to profit one or more of

Defendants or their customers.

83. Many of these large spoof orders amounted to front-running other orders to be

executed during the London Fix, or the London Fix itself, and were specifically intended to

manipulate prices registered during the London Fix and/or or the outcome of the London Fix

itself.

3. Numerous Trading Days Exhibit Evidence of Manipulation

84. Anomalous price movements during the fixing window that are highly suggestive

of manipulation - like those on June 28, 2012 - can be witnessed on numerous days, where prices

near the 3 p.m. London Fix spike, either upward or downward, and then retreat in the opposite

direction as the price is fixed. Five trading days are analyzed below as illustrative of the

overall trend during the Class Period. On February 1, 2013, there was a dramatic drop in price

from nearly $1678 to below $1665, contemporaneous with the beginning of the London Fix.

The price began recovering during the London Fix and continued afterwards. This movement

around the fixing window is highly anomalous and suggestive of manipulation because it tends



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23

to show that the market ultimately discounted to some degree the pricing information that

occurred during the London Fix.

85. Then again, on February 3, 2012, the price for gold was approximately $1750

minutes before the beginning of the PM London Fix call. The price then fell dramatically to

$1738 as the call opened. This drop anticipated the decline that occurred during the call to below

$1735. Minutes after the call ended, prices recovered strongly, reaching a post Fix high of

approximately $1743. This movement around the fixing window (steep drop just before the call,

continued during the call, steeply recovering afterwards) is highly anomalous and suggestive of

manipulation because it tends to show that the market ultimately discounted to some degree the

pricing information that occurred during the London Fix.



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86. On January 4, 2012, there was anomalous price movement before the beginning

of the PM Fix call, this time in an upward direction. The gold price rose from below $1599 to

more than $1614 within the half hour before the beginning of the call, only to surrender most of

these gains within the half hour following the call. This movement around the fixing window

(steep rise just before the call, with a clear reversal that begins at the very beginning of the call)

is highly anomalous and suggestive of manipulation because it tends to show that the market

ultimately discounted to some degree the pricing information that occurred during the London

Fix.



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26

88. On May 21, 2013, the gold price declined significantly in the 25 minutes prior to

the call only to recovery briskly once the call ended. This movement around the fixing window

is highly anomalous and suggestive of manipulation because it tends to show that the market

ultimately discounted to some degree the pricing information that occurred during the Fix.



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27

89. If the five previous examples of anomalous volatility around the London Fix mere

statistical outliers and not evidence of manipulation, then it would be expected that this volatility

would disappear when looking at an average of all the trading days during the class period. To

the contrary, the price manipulation actually becomes clearer when viewed over the past fifteen

years. The chart below shows the change in physical gold prices if each trading day for the

period from 1998 through 2013 were averaged together. The dramatic changes in price followed

by swift reversals at the time of the AM and PM London Fix in this chart demonstrate that the

phenomenon is not coincidental statistical noise occurring on only a few cherry-picked dates, but

rather is a clear trend that cannot be explained by chance. Appendix A contains charts breaking

down the intra-day averages by one-year periods.

90. The table below illustrates that price moves of statistically anomalous size during

the London Fix occurred with great frequency. If these London Fix price moves were the result

of natural market forces, it would be expected that those price moves would be either maintained

or reversed with the same statistical regularity as any other price move observed during the

999.6

999.7

999.8

999.9

1000.0

1000.1

1000.2

1000.3

1000.4

Normalizedfuturespricep

ertroyoz.,

base=1000USD

London time

Average Normalized Physical Gold Price: Jan 1998 - Dec 2013

AM Fixing

PM Fixing



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28

trading day. If it were manipulation that caused the London Fix price moves, these moves would

be reversed with greater frequency than expected because the manipulators must reverse their

trade in order to book a profit and because legitimate market factors would ultimately cause

some degree of discounting of the pricing information from the London Fix. Sure enough,

statistically anomalous price reversals after the London Fix, of the price changes during the

London Fix, occurred with enough regularity to indicate manipulative activity.

Frequency of Anomalous Price Moves During London Fix Calls

% of Fix Calls Accompanied by Price

Moves of Anomalous Size

% of Fix Calls Accompanied by

Anomalous Price Moves that were

Subsequently Reversed

2010 17%-23% 7%-10%

2011 16%-25% 5%-12%

2012 18%-25% 8%-12%

2013 20%-29% 12%-17%

2010-2013 18%-25% 8%-13%

91. The following chart depicts the increasing extent to which anomalous price moves

at the time of the London Fix were followed by a reversal of at least 50% of the original move,

within 30 or 60 minutes of the London Fix.



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92. These spikes and their reversals indicate the influence of manipulative and

collusive behavior. The pattern is not explained by neutral or benign causes, but plausibly

demonstrates the manipulative conduct of Defendants to move prices on both the physical and

derivative markets to their benefit.

93. The chart below demonstrates from 1998-2013 the rate of forecast error a

square of the difference between predicted market moves based on econometrics and the

markets actual moves. These forecast errors hit a massive peak during the brief period that is

encompassed by the 3 p.m. London Fix. Appendix B contains charts of forecast errors broken

down by year.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

2010 2011 2012 2013

%o

fanoma

lous

fix

ingca

llmovesrevers

ing

bya

tle

as

tha

lf

Sample period

Post-fix reversal of anomalous PM fixing call pricemoves

30-minute post-fix reversal period 1-hour post-fix reversal period



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30

0

100

200

300

400

500

600

Averagenumberofcontractstraded

Average On-The-Run Comex Futures TradingVolume: 2010-2013

94. This is contrary to what should occur in a market free of manipulation. The

period surrounding 3 p.m. is the time at which the most gold futures contracts are traded, as the

following chart reflects. Accordingly, it should be the period during which the market is

maximally efficient. Instead, it is the direct opposite. This, too, is highly anomalous and

suggestive of market manipulation.

0.000000%

0.000002%

0.000004%

0.000006%

0.000008%

0.0000 10%

0.0000 12%

0.000014%

0.0000 16%

0.000018%

0.000020%

0.000000%

0.0000 01%

0.000002%

0.000003%

0.000004%

0.000005%

0.000006%

0.000007%

0.000008%

0.000009%

Rolling30-minutereturmfo

recasterrors

Rolling30-minutelinearforecasterrors

London time

Average Rolling Forecast Errors: Jan 1998 - Dec 2013

Linear Forecast Errors Return Forecast Errors

AM Fixing

PM Fixing



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31

95. If the volatility surrounding the London Fix were simply a natural reaction of the

market to the London Fix itself and not manipulative trading, it would be expected that the

volatility would have always existed for as long as the London Fix has been reported. In fact, as

demonstrated by the chart below, the London Fix has not always had as pronounced an effect on

prices, but that over time volatility around the London Fix increased. There is no change in the

legitimate public aspect of the London Fix that could explain this. In fact, experts, such as

Trinity College Dublin professor of finance Brian Lucey, have opined that the relevance of the

London Fix to the market should be fading.20 But increasing volatility over time is consistent

with the advent of manipulative trading and either an increasing number of participants over time

or a more brazen magnitude of manipulation by those participants.

20 Suzi Ring & Nicholas Larkin,FCA Said to Observe London Gold Fixing as Scrutiny Increase,BLOOMBERG.COM, April 25, 2014, available at: http://www.businessweek.com/news/2014-04-24/fca-said-to-observe-london-gold-fixing-calls-as-scrutiny-grows

90

100

110

120

130

Intensityindexvalue

Date

Pre-Fix Volatility - Intensity Index



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32

96. The above chart depicts the relative volatility of moves in gold in the ten minutes

immediately preceding the AM and PM London Fixings. The increase of this Intensity

index,21 from a low in 2000 to a peak in 2010 (when the relative volatility of the price

movements was the highest) and continuing through the present (where those pre-call price

movements remain at historically elevated levels), is indicative of manipulative forces at work

that are exclusive of, and more intense than, what the natural effects of the London Fix on the

market may have been in the past.

97. The increasingly unusual pre-Fix activity over the years can also be observed by

looking only at those days when the pre-Fix activity was a downward move in prices. The below

chart depicts an index of the intensity of downward moves in gold immediately preceding the

AM and PM London Fixings. The increase of the index from a relative low in 2000 to a peak in

2010, when the intensity of the downward price movements just prior to the London Fixes was

the most dramatic, carries over to today where the intensity remains at historically elevated

levels.22

21 This index is based on the volatility of gold prices in the build up to the twice daily Londonfixings relative to the volatility of gold prices throughout the full London trading day. The indexitself is made by computing the one-year rolling average of this relative volatility, benchmarkedto an index value of 100 in January 2000. As such, an increase in the relative volatility of pre-fix

moves in gold prices causes the index value to increase, while a decrease in the relative volatilitycauses the index to decrease.22 This chart (on the following page) was developed by first constructing an index based on thepercentage of moves immediately preceding the AM and PM London Gold Fixings that werenegative over a given annual period, rolled forward each day. An inverse cumulative returnindex based on the above percentages was then created to show how the intensity changed overtime. This series is benchmarked to an index value of 100 in January 2000. In other words, arelative increase in the percentage of pre-fix moves in gold prices that are negative in a givenannual period causes the index value to increase, while a decrease in negative observationscauses the index to decrease.



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98. If the increased price volatility and volume accompanying the London Fix could

be explained by the innocent speculation of the greater market on the outcome of the London Fix

price announcement, then it would be expected that the overall impact of that volatility would be

neutral and not increasingly negative over time as the above chart exhibits. That is, sometimes

the market would speculate that the London Fix would lower the price of gold, and sometimes

would raise it, and further that sometimes this speculation would be correct and sometimes

incorrect in roughly equal measure over time.

99. To the contrary, although the London Fix was associated with both manipulative

and abnormal increases and decreases in gold prices, the London Fix appears, in the aggregate, to

have had a net negative effect overall on the price of gold throughout the Class Period. This can

be demonstrated by examining the price of gold during the part of the trading day closest to the

London Fixes. Gold is traded 24 hours a day. The trading day for gold can be broken up into

80

100

120

140

160

180

200

220

240

Intensityindexvalue

Date

Downward Moves - Intensity Index



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34

three equal eight-hour periods, the Fixing Period from 8:00-16:00 London Time in which both

the AM and PM London Fixes occur, the Pre-Fix Period from 0:00-8:00 and the Post Fix

Period from 16:00-24:00 London time. If the volatility surrounding the London Fix was purely

random and not the result of manipulation, there would be no significant difference over time

between the period containing the London Fixes (8:00-16:00) and the Pre-Fix and Post-Fix

periods.

100. However, as the chart below demonstrates, gold prices during the Fixing Period

(8:00-16:00) moved consistently lower over time when compared to price activity during Pre-Fix

and Post-Fix portions of the trading day.

23

This trading pattern is consistent with manipulation

and cannot be explained by random variation.

23 The indices for each trading period (Pre-Fix, Fix and Post-Fix) in the chart on this page werecalculated by taking the compound returns of gold prices for each period and ignoringfluctuations outside of the period, resulting in a series of daily eight-hour returns. Acompounded series with a starting Index value of 100 was calculated, where the movement eachday is given by the compound gold futures price returns for that trading period on the given day.



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101. If participants in the London Fixes were not leaking information or manipulating

prices during the London PM Fix call, it would be unlikely for price activity in the market when

the London Fix call begins to be predictive of prices during the remainder of the call and of the

direction of the London Fix itself. However, price activity in the first minutes immediately after

the start of the call24 was highly predictive of subsequent prices during the call and of the

ultimate price of the fixing, as the table below shows. This suggests that participants on the call

were trading based on information gleaned in the first moments of the call or disseminated

before the call began.

Period % of Time Price Activity Immediately After Start of CallPredicted the Overall Move During Call Window2010 67%-70%

2011 67%-70%

2012 70%-75%

2013 78%-82%

2010-2013 70%-75%

102. The price activity surrounding the London Fix does not conform to what one

would expect in the lead up to, and announcement of, other regularly scheduled releases of

important market information. Rather, pricing around the London Fixes is anomalous when

compared to the impact of other economic announcements which market participants can trade in

anticipation of. The chart at 89 shows that on average gold prices move in a volatile fashion

before the London Fix price is announced, either during, or even before the beginning of the call

begins. When other important economic numbers are announced, the price action before the

24 The estimation window immediately after the start of the call is defined as a function of thelength of the fixing call on each day. Specifically, if the fixing call is less than or equal to 3minutes in length, the initial price activity is measured during the first minute. If the call isbetween 4 and 5 minutes in length, the first two minutes are used for initial estimation, while thefirst three minutes are used for initial estimation for all calls greater than 5 minutes in length.



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announcement is relatively muted, and the price moves sharply at the moment of announcement,

presumably because the substance of the announcement has not been leaked beforehand and

manipulation is not taking place.

103. The following two charts demonstrate this pattern using the average intra-day

price movement of gold futures on days of important economic announcements. The first chart

shows the effect of non-farm payroll (NFP) numbers announced monthly by the Bureau of

Labor Statistics. The second chart shows the effect of seven announcements of the Federal

Funds Rate by the Federal Reserve from March through December 2013.25

25 The Federal Reserve has changed the time of day during which it makes the Federal FundsRate announcement several times during the Class Period. The period March December 2013was chosen because announcements were uniformly made at 2pm New York time. Similarcharts for other time periods can be found in Appendix D.

Case 1:14-cv-05153-VEC Document 2-1 Filed 07/09/14 Page 1 of 22


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104. The distinct price movement at the very moment of release that is the hallmark of

a non-leaked, non-manipulated announcement is most starkly shown in the charts below which

depict the rolling forecast error of gold prices on dates of the NFP and Federal Funds Rate

announcements. Rolling forecast error is simply a measure of how much the magnitude of a

change in prices deviates from what econometric principles would predict.



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105. When the rolling forecast error charts for the Fed Funds Rate and the NFP above

are compared with the one for the London Fix at 93, it is clear that where the former two exhibit

a nearly vertical increase in forecast error (i.e., the increase in statistically anomalous price

movement) at the precise moment of announcement, forecast errors for the London Fix begin



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even before the 15:00 start time of London PM call, not to mention well before the actual

London Fix price is announced.

106. The anomalous price activity surrounding the London Fixes cannot be explained

by generic market forces, such as contemporaneous economic developments or release of news

unrelated to the London Fixes. To illustrate this point, the below charts plot the price movement

of gold for February 3, 2012 (originally charted at 85). As the charts demonstrate, other

commodities (as represented by the Dow-Jones UBS Commodities Index) were not subject to the

same price fluctuations as gold during the period of the London Fixes, neither were bond or

equity markets (represented by the Emerging Market Bonds Index and the MSCI world index,

respectively). A fourth chart compares gold with the aforementioned three indices, and two

others: the U.S Dollar Index and S&P 500 for February 3, 2012.26

26 Attached as Appendix C are corresponding charts for the remaining four illustrative tradingdays cited previously at 84-88: June 14, 2012, November 15, 2012, February 1, 2013 and May21 2013. These charts exhibit the same lack of correlation between moves in gold prices andother asset prices that those for February 3, 2012 do.



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107. In summary, the price activity surrounding the London Fixes is indicative of

manipulation and not natural market forces for the following reasons:

a. Around the period of the London Fix calls, gold prices experience anomalous

volatility in price.

b. This volatility is present not on isolated trading days but manifests even more

clearly when averaged across years of trade data.

c. The anomalous price changes during the call were not maintained afterwards,

but in fact were in some part reversed with an unusual frequency and to an

anomalous degree.

d. The anomalous price moves occurred during peaks in trading volume, when

the market should be at its most efficient.



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e. The pricing anomalies strengthened in intensity over time, demonstrating that

they are not an inevitable result of an innocent fixing process.

f. There were upward and downward manipulations over a period of years, price

activity surrounding the London Fix periods had a net negative effect on gold

prices in comparison to other periods. This tends to indicate that artificial

forces were acting on the market during those periods.

g. Trading activity during immediately after the beginning of the London Fix

was highly predictive of activity during the rest of the call, and of the final

London Fix price, suggesting that manipulative traders were moving the

prices of gold based on information gleaned for the London Fix calls.

h. The price activity surrounding the London Fixes is not typical of the price

activity one would expect to attend a regularly scheduled announcement of

news material to the gold market.

i. The anomalous price activity in the gold market is not mirrored by other

precious metals or broader market indices, further eliminating innocent

explanations and supporting a conclusion that manipulation occurred.

E. Government Investigations and Studies

108. In recent months, numerous reports have confirmed investigations or studies

related into the London Fix and the wrongdoing discussed herein.

109. On March 13, 2013, The Wall Street Journal reported that the CFTC was

examining the setting of prices in London.27 The Wall Street Journal noted that the London

27 Katy Burne, Matt Day, and Tatyana Shumsky, U.S. Probes Gold Pricing, THE WALL STREETJOURNAL, March 13, 2013, available at:http://online.wsj.com/news/articles/SB10001424127887324077704578358381575462340



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Fix helps determine the value of derivatives whose prices are tied to gold further noting that

as of September 30, 2012, U.S. commercial banks had $198 billion of precious metals-related

contracts outstanding.28

110. In November 2013, it was reported that the Financial Conduct Authority, the

United Kingdoms top financial regulator, had opened an investigation into the London Fix.29 In

an article detailing the reported investigation, Bloomberg quoted Thorsten Polleit, chief

economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former

economist at Defendant Barclays as saying, Traders involved in this price-determining process

have knowledge which, even for a short time, is superior to other peoples knowledge. . . . That

is the great flaw of the London gold-fixing.30

111. The London Bullion Market Association indicated in November that it was

reviewing its benchmarks to determine whether the benchmarks conform with IOSCO

principles.31 The IOSCO principles including making prices based on observable deals to

increase transparency.32

112. Rt. Hon. Pat McFadden, a Labour party lawmaker who sits on Parliaments

Treasury Select Committee indicated that the FCA needed to investigate the gold market, stating

The gold market is hugely influential, and there needs to be public trust in the gold price. . . .

28Id.

29Liam Vaughan, Nicholas Larkin, and Suzi Ring,London Gold Fix Calls Draw Scrutiny AmidHeavy Trading, BLOOMBERG.COM, Nov. 26, 2013, available at:

http://www.bloomberg.com/news/2013-11-26/gold-fix-drawing-scrutiny-amid-knowledge-tied-to-eruption.html

30Id.

31Nicholas Larkin,London Bullion Market Association is Reviewing Benchmarks,BLOOMBERG.COM, Nov. 22, 2013, available at: http://www.bloomberg.com/news/2013-11-22/london-bullion-market-association-is-reviewing-benchmarks.html

32Id.



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Question marks have been raised about the benchmark price of gold, and its important that

regulators investigate.33

113. In a February 4, 2014 hearing before the House of Commons Treasury

Committee, McFadden questioned FCA CEO Martin Wheatley about the FCAs investigation

into benchmarks other than LIBOR and the WM/Reuters rates, asking Weve had LIBOR.

Weve now got question marks over the foreign exchange markets. Are there any other

benchmarks like this which are fixed here in London that you have concerns about or are

investigating?34 Wheatley responded, Yes, there are. Those investigations are not public, so I

cant tell what the investigations are, but there are a number of other benchmarks London

being the center it is, there are a number of other benchmarks that operate in London that we are

investigating because of concerns that have been raised with us.35

114. Defendant DB has reportedly had employees interviewed by Bafin, Germanys

top financial regulator, as a result of Bafins investigation into potential manipulation of gold

prices.36

115. Elke Koenig, the president of Bafin, indicated that allegations about manipulation

of foreign exchange and precious metals markets (including the gold market) were particularly

serious because such reference values are based unlike LIBOR and EURIBOR typically on

transactions in liquid markets and not on estimates of the banks.37 Bloomberg characterized his

33Id.

34

Videorecording, House of Commons Treasury Committee meeting at 1:17:23-1:17:38, Feb. 4,2014, available at: http://www.parliamentlive.tv/Main/Player.aspx?meetingId=14826

35Id. at 1:17:39-1:17:53.

36 Karin Matussek and Oliver Suess,Metals, Currency Rigging Is Worse than Libor, Bafin Says,Bloomberg.com, Jan. 17, 2014, available at: http://www.bloomberg.com/news/2014-01-16/metals-currency-rigging-worse-than-libor-bafin-s-koenig-says.html

37Id.



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statement as indicating that the possible manipulation was worse than the Libor-rigging

scandal.38

116. In fact, two Defendants here have been implicated and paid substantial fines as a

result of investigations into LIBOR-rigging. Defendant Barclays settled with the CFTC,

Department of Justice, and Financial Services Authority (the UKs precursor to the FCA) in June

2012.39 Barclays avoided a fine from the European Commission by revealing the collusion to the

agency.40 Defendant DB was fined 725 million by the European Commission, the most of any

LIBOR defendant.41

117. The same day that Bafin made its comments, it was reported that Defendant DB

would withdraw from participating in setting gold and silver benchmarks.42

118. On April 25, 2014, Bloomberg.com reported that the FCA indeed investigating

the London Fix, with regulators scheduled to observe the fixing process at the offices of

defendant SocGen, and that regulators would be visiting the offices of all five defendants.43

38Id.

39See Joshua Gallu, Silla Brush, and Lindsay Fortado,Barclays Libor Fine Sends Stocks Lower

As Probes Widen, BLOOMBERG.COM, June 28, 2012, available at:http://www.bloomberg.com/news/2012-06-28/barclays-451-million-libor-fine-paves-the-way-for-competitors.html

40 Elena Logutenkova, UBS, Barclays Dodge $4.3 billion EU Fines for Rate Rigging,BLOOMBERG.COM, Dec. 4, 2013, available at: http://www.bloomberg.com/news/2013-12-04/ubs-barclays-dodge-4-3billion-eu-fines-for-rate-rigging.html

41

Gaspard Sebag and Aoife White, Deutsche Bank to RBS Fined by EU for Rate Rigging,BLOOMBERG.COM, Dec. 4, 2013, available at: http://www.bloomberg.com/news/2013-12-04/deutsche-bank-to-rbs-fined-by-eu-for-rate-rigging.html

42 Maria Kolesnikova and Nicholas Larkin, Deutsche Bank Withdraws from Gold Fixing inCommodities Cuts, BLOOMBERG.COM, Jan. 17, 2014, available at:http://www.bloomberg.com/news/2014-01-17/deutsche-bank-withdraws-from-gold-fixing-in-commodities-cutback.html



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119. Because the FCA does not regulate the market for physical gold, the FCAs

interest in gold manipulation indicates a concern that derivative products based on or linked to

the London Fix or other spot prices are the target of manipulation.

120. As discussed above at 68-72, on May 23, 2014, the FCA fined Barclays the

equivalent of $44 million for its role in manipulating the London Fix for its own benefit.

121. There is no indication that the FCA has closed its investigation of the other

defendants.

F. Indicia of Agreement, Combination, or Conspiracy

122. As discussed above, there are numerous indicia that Defendants conduct was not

merely coincidental but carefully crafted to disturb the efficient operation of markets for physical

gold and gold derivatives.

123. Defendants have each financially benefited from the anticompetitive conduct

described above.

124. Certain of the Defendants have been the subject of numerous investigations and

proposed investigations, including by the Commodity Futures Trading Commission, Financial

Conduct Authority, and Bafin.

125. Defendants have engaged in parallel conduct that would not be consistent with

market forces, declining to take advantage of gross inefficiencies by competitors in the market.

VII. ANTITRUST INJURY

126. Defendants restraints of trade and anticompetitive conduct adversely affected

competition and prices in the market for physical gold and gold derivatives.

43 Suzi Ring & Nicholas Larkin,FCA Said to Observe London Gold Fixing as Scrutiny Increase,BLOOMBERG.COM, April 25, 2014.



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127. Plaintiff and other Class members were deprived of the benefits of normal market

operation, including market-determined pricing. As a consequence of Defendants conduct,

Plaintiff and the Class suffered substantial financial losses and were, therefore, injured in their

business or property.

128. As shown above, the manipulation detailed herein both artificially inflated and

artificially suppressed the price of gold, injuring both long and short holders of gold futures and

options contracts. To the extent the aggregate trend has been to suppress prices, 99-100, this

has resulted in (as of the last available This Month in Gold Futures Market Report from the

CFTC

44

) an extraordinarily positive result for Commercial Traders in gold futures contracts (who

held between 352,500 and 381,200 short futures contracts, as opposed to merely 140,900 to

145,100 long futures contracts in the same period. This heavy weight toward shorting gold

futures contracts means a net drop in gold prices would be extremely lucrative for commercial

traders.45 Commercial Traders are entities, such as Defendants, that use futures or options for

hedging purposes, as opposed to non-commercial entities that do not own the underlying asset

or its financial equivalent and hold only derivatives contracts.

129. The CFTC bank participation reports46 demonstrate that these commercial

shorts are largely non-U.S. banks like Defendants.

Short/Long Positions by Non-U.S. Banks in COMEX Gold Futures Contracts, according to CFTC

Date Long Short Net Position

January 2012 7,710 38,812 Short 31,102

44 These reports were discontinued effective January 2013. See CFTC, This Month in Gold Futures Market,

available at: http://www.cftc.gov/oce/web/gold.htm

45See CFTC, This Month in Gold Futures Market, available at:

http://www.cftc.gov/oce/web/gold.htm

46 http://www.cftc.gov/marketreports/bankparticipationreports/index.htm



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February 2012 9,161 44,908 Short 35,747

March 2012 11,152 47,409 Short 36,257

April 2012 13,044 50,846 Short 37,802

May 2012 10,372 51,891 Short 41,519

June 2012 9,572 54,413 Short 44,841

July 2012 8,530 58,479 Short 49,949

August 2012 9,199 49,772 Short 40,573

September 2012 10,710 64,144 Short 53,434

October 2012 34,881 113,445 Short 78,564

November 2012 37,503 96,939 Short 59,436

December 2012 35,526 80,033 Short 44,507

January 2013 32,191 78,038 Short 45,847

February 2013 30,272 79,006 Short 48,734

March 2013 29,219 72,545 Short 43,326

April 2013 29,216 73,669 Short 44,453

May 2013 32,483 54,957 Short 22,474

June 2013 24,035 49,075 Short 25,060

July 2013 34,904 58,656 Short 23,752

August 2013 25,956 47,996 Short 22,040

September 2013 23,626 60,350 Short 36,724

October 2013 24,296 57,665 Short 33,369

November 2013 19,006 58,486 Short 39,480

December 2013 25,508 39,547 Short 14,039

January 2014 26,128 32,492 Short 6,364

February 2014 18,752 48,860 Short 30,108

March 2014 17,526 54,385 Short 36,859



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April 2014 20,048 59,025 Short 38,977

At no point for which reports are currently available were non-U.S. banks, such as Defendants,

long on gold futures contracts.

VIII. THE DISCOVERY RULE AND FRAUDULENT CONCEALMENT

130. Plaintiff did not discover, and could not have reasonably discovered through the

exercise of reasonable diligence, the wrongdoing discussed in this complaint, until, at the very

earliest, January 2014, when Defendant DB withdrew from the fixing after interviews with

Bafin, Germanys financial regulator.

131. Before the DB departure was announced and Bafins president revealed the

seriousness of the allegations, Plaintiff could not have stated facts plausibly stating the

conspiracy to manipulate the price of gold and gold derivatives.

132. The activity Defendants undertook was of a self-concealing nature. The London

Fix teleconference is not publicly-accessible. The information Defendants received from their

clients about the demand for purchases and sales of gold before and during the teleconference

were not publicly-accessible. Without these pieces of information, Plaintiff would not be able to

discern market dislocation or the existence of spoof trades.

IX. CLAIMS

COUNT I (PRICE-FIXING)

133. Plaintiff hereby incorporates each preceding and succeeding paragraph as though

fully set forth herein.

134. Beginning at least as early as January 1, 2004, and continuing thereafter,

Defendants and their coconspirators entered into and engaged in a contract, combination or

conspiracy in restraint of trade to artificially manipulate prices of gold and gold derivatives in



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violation of Section 1 of the Sherman Act (15 U.S.C. 1). Such contract, combination or

conspiracy constitutes a per se violation of the federal antitrust laws and is, in any event, an

unreasonable and unlawful restraint of trade.

135. The contract, combination or conspiracy consisted of a continuing agreement,

understanding or concerted action among Defendants and their co-conspirators in furtherance of

which Defendants manipulated and determined the price of physical gold and gold derivatives.

136. Defendants and their coconspirators contract, combination, agreement,

understanding or concerted action occurred within the flow of, and substantially affected

interstate commerce.

137. As a direct and proximate result of Defendants scheme, Plaintiff and the

members of the Class have been injured and financially damaged in their respective businesses

and property, in amounts which are presently undetermined. Plaintiffs injuries consist of

transacting at artificial prices in an artificial and manipulated market. Plaintiffs injuries are of

the type the antitrust laws were designed to prevent, and flow from that which makes defendants

conduct unlawful.

COUNT II (PRICE MANIPULATION)



139. Defendants and their coconspirators, through the acts alleged in this Complaint,

specifically intended to and did cause unlawful and artificial prices of gold and gold derivatives,

in violation of the Commodity Exchange Act, 7 U.S.C. 1, et seq.

140. Plaintiff and others who transacted in gold futures, including during the Class

Period transacted at artificial and unlawful prices resulting from Defendants manipulations in



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violation of the Commodity Exchange Act, 7 U.S.C. 1, et seq., and as a direct result thereof

were injured and suffered damages.

141. Plaintiff and the Class are each entitled to damages for the violations of the

Commodity Exchange Act alleged herein.

142. Defendants conduct proximately caused injury to Plaintiff and other members of

the Class who transacted in an artificial and manipulated market, at manipulated prices, and with

artificial price trends, during the Class Period.

143. Plaintiff and other members of the Class who purchased or sold gold futures

contracts, including COMEX gold futures contracts during the Class Period were injured and are

each entitled to their actual damages for the violations of the Commodity Exchange Act alleged

herein.

COUNT III (MANIPULATION BY FALSE REPORTING, FRAUD, AND DECEIT)



145. By their intentional and reckless misconduct, Defendants each violated Section

6(c)(1) of the Commodity Exchange Act, as amended, 7 U.S.C. 9, and caused prices of gold

futures contracts, including COMEX gold, to be artificial during the Class Period. Defendants

delivered and caused to be delivered for transmission through the mails and interstate commerce,

by multiple means of communication, a false or misleading or inaccurate report concerning the

London Fix or other market information or conditions that affect or tend to affect the price of

gold and gold futures, which are commodities in interstate commerce, knowing, or acting in

reckless disregard of the fact that such report was false, misleading or inaccurate.



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146. Under Section 6(c)(1) of the Commodity Exchange Act, as amended, codified at 7

U.S.C. 9, and Section 22 of the Commodity Exchange Act, as amended, 7 U.S.C. 25, it is

unlawful for any person, directly or indirectly, to use or employ or attempt to use or employ, in

connection with any swap, or a contract of sale of any commodity in interstate commerce, or for

future delivery on or subject to the rules of any registered entity, any manipulative or deceptive

device or contrivance, in contravention of such rules and regulations as the CFTC, which shall

promulgate by not later than 1 year after July 21, 2010.

147. In July 2011, the CFTC promulgated Rule 180.1(a), 17 C.F.R. 180.1(a) (2011),

which provides, in relevant part:

It shall be unlawful for any person, directly or indirectly, in connection with anyswap, or contract of sale of any commodity in interstate commerce, or contract forfuture delivery on or subject to the rules of any registered entity, to intentionallyor recklessly use or employ, or attempt to use or employ, any manipulativedevice, scheme, or artifice to defraud, make, or attempt to make, any untrue ormisleading statement of a material fact or to omit to state a material fact necessaryin order to make the statements made not untrue or misleading.

148. Unlawful manipulation under the Commodity Exchange Act, as amended, and

Rule 180.1 includes delivering, or causing to be delivered for transmission through the mails or

interstate commerce, by any means of communication whatsoever concerning market

information or conditions that affect or tend to affect the price of any commodity in interstate

commerce, knowing, or acting in reckless disregard of the fact that such report is false,

misleading or inaccurate.

149. During the Class Period, Defendants used manipulative or deceptive devices or

contrivances, in connection with contracts of sale of gold in interstate commerce, including, but

not limited to, making untrue or misleading statements of material facts, or omitting material

facts necessary to make the statements not misleading, including:

a. making untrue or misleading statements regarding the London Fix



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b. failing to disclose, and omitting, that they engaged in spoofing

c. failing to disclose, and omitting, that they were unlawfully conspiring

between and among themselves to manipulate COMEX gold prices;

d. issuing statements and directly engaging in the acts alleged herein

knowingly or with reckless disregard for the truth; and

e. employing other deceptive devices as described above.

150. Defendants conduct proximately caused injury to Plaintiff and other members of

the Class who transacted in an artificial and manipulated market, at manipulated prices, and with

artificial price trends, during the Class Period.

151. Plaintiff and the Class are each entitled to damages for the violations of the

Commodity Exchange Act alleged herein.

COUNT IV (PRINCIPAL-AGENT LIABILITY)


fully set forth herein

153. Defendants BNS, Barclays, DB, HSBC, and SocGen and others were each an

agent and/or other person on behalf of the other Defendants. Because they acted pursuant to and

were members of a conspiracy and unlawful agreement, Defendants acted as one anothers

agents during the Class Period.

154. This included when Defendants, through their employees, agents, and/or others

directed, developed, executed, and otherwise acted with respect to the scheme alleged herein.

Each Defendant is liable under Section 2(a)(1) of the Commodity Exchange Act, 7 U.S.C.

2(a)(1)(B), for the manipulative acts or omissions of its agents, employees, or other persons

acting on their behalf.



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155. Plaintiff and Class members are each entitled to damages for the violations

alleged herein.

COUNT V (AIDING AND ABETTING LIABILITY)



157. All Defendants are also liable for aiding and abetting manipulation.

158. Each and every Defendant had extensive knowledge of the manipulation and, with

such knowledge, materially assisted the manipulation by the other Defendants.

159. Each Defendant made and benefited from the manipulative acts and willfully

aided, abetted, counseled, induced, and/or procured the commission of violations of the

Commodity Exchange Act by the other Defendants.

160. Each Defendant supervised the making of and benefited from the manipulative

acts and willfully aided, abetted, counseled, induced, and/or procured the commission of

violations of the Commodity Exchange Act by the other Defendants.

161. Each Defendant, by and through their respective partners, agents, employees

and/or other persons, benefited from the manipulative acts and willfully aided, abetted,

counseled, induced, and/or procured the commission of violations of the Commodity Exchange

Act by the other Defendants.

162. Each Defendant participated in the development of the manipulative scheme and

participated in the execution of, and supervised, the manipulative acts. Each Defendant also

benefited from the manipulative acts and willfully aided, abetted, counseled, induced, and/or

procured the commission of violations of the Commodity Exchange Act by the other Defendants.



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163. Defendants each played their component role and each knowingly aided, abetted,

counseled, induced, and/or procured the violations alleged herein. Defendants did so knowing of

each other's manipulation of gold market prices, and willfully intended to assist these

manipulations, which resulted in COMEX gold futures contracts reaching artificial levels during

the Class Period in violation of Section 22(a)(1) of the Commodity Exchange Act, 7 U.S.C.

25(a)(l).

164. Plaintiff and the members of the Class are each entitled to actual damages for the

violations of the Commodity Exchange Act alleged herein.

COUNT VI (UNJUST ENRICHMENT)



166. Because of the acts of Defendants and their coconspirators as alleged herein,

Defendants have been unjustly enriched at the expense of Plaintiff and members of the Class.

167. Plaintiff and members of the Class seek restoration of the monies of which they

were unfairly and improperly deprived, as described herein.

X. DEMAND FOR JUDGMENT

168. WHEREFORE, Plaintiff, on behalf of himself and the proposed Class,

respectfully requests that the Court:

169. Determine that this action may be maintained as a class action pursuant to Federal

Rule of Civil Procedure 23(a) and (b)(3), direct that reasonable notice of this action, as provided

by Federal Rule of Civil Procedure 23(c)(2), be given to the class, and declare Plaintiff as the

represent

Documents

Gold Manipulation DB Et Al Full