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In re London Silver Fixing, Ltd., Antitrust Litigation

United States District Court, S.D. New York

July 25, 2018

IN RE LONDON SILVER FIXING, LTD., ANTITRUST LITIGATION This Document Relates to All Actions

          OPINION AND ORDER

          VALERIE CAPRONI UNITED STATES DISTRICT JUDGE

         This case began as a benchmark-fixing case. Until 2013, the price of silver bullion was set in part through a daily private auction among a small group of silver dealers (“the Silver Fixing”). Based on a sophisticated econometric analysis of thousands of price quotes from the silver markets, Plaintiffs alleged that this daily private auction was a cover for a conspiracy among the participating banks, Deutsche Bank, HSBC, and Bank of Nova Scotia (together, the “Fixing Banks”), to suppress the price for physical silver and silver-denominated financial products.

         In September 2016, the Court held that Plaintiffs had stated claims against HSBC and Bank of Nova Scotia. Plaintiffs settled with Deutsche Bank for $38 million dollars and what Plaintiffs hoped would be a treasure trove of preserved electronic chat messages among precious metals traders employed by Deutsche Bank and traders at Bank of America, Barclays, Standard Chartered, BNP Paribas, and UBS (the “Non-Fixing Banks”). The chat messages, many of which are quoted in the Third Amended Complaint (the “TAC”) (Dkt. 258), appear to document sharing of proprietary information and episodic attempts to coordinate trading, apparently in the hopes of profiting from resulting movement in the prices of silver and silver-denominated financial instruments. After acquiring these chat messages, Plaintiffs amended their complaint to allege that the Non-Fixing Banks conspired with the Fixing Banks and among themselves to manipulate the Silver Fixing and the silver markets more generally.

         But what Plaintiffs represented to be a mother lode of evidence of a vast conspiracy turns out to be less than overwhelming. The Non-Fixing Banks have moved to dismiss on the grounds that the chat messages do not connect them to a conspiracy with the Fixing Banks and do not document any actionable manipulation of the silver markets (among other things). For the reasons that follow, the Court agrees in part. Plaintiffs' allegations of an overarching conspiracy involving the Fixing Banks and Non-Fixing Banks are implausible. The chat messages provide a basis to infer the existence of a more limited conspiracy to episodically manipulate the silver markets, but Plaintiffs lack antitrust standing to bring a claim based on that theory. Plaintiffs also fail to allege market manipulation by any of the Non-Fixing Banks. Thus, the Non-Fixing Banks' motion to dismiss is GRANTED.

         BACKGROUND

         From 1897 to 2014, the price of silver bullion was set through the Silver Fixing. See In re London Silver Fixing, Ltd., Antitrust Litig., 213 F.Supp.3d 530, 542 (S.D.N.Y. 2016) (“Silver I”). During the relevant period, 2007 to 2013, the Silver Fixing was conducted during a private conference call among the Fixing Banks at noon London time. Id. at 542, 544. The daily fixing operated through a “Walrasian” auction. Id. at 542. Each Fixing Bank would announce how much silver they wished to buy or sell at a given price-based on client orders and proprietary demand-and the price would be adjusted until an equilibrium of supply and demand was reached. Id. The market-clearing price, or the “Fix Price, ” was then published to the market. Id.

         The Second Amended Class Action Complaint (the “SAC”) (Dkt. 63) alleged that the Silver Fixing was a cover for a long-running conspiracy to suppress artificially the price of physical silver and silver-denominated financial instruments. 213 F.Supp.3d at 543-44. Relying on an econometric analysis of the spot market for physical silver and the market for Commodity Exchange, Inc. (“COMEX”) silver futures, Plaintiffs alleged that silver prices “moved downward around the Silver Fixing much more frequently than [they] moved upward” and more frequently than would be expected in an efficient market. See Id. at 544. Plaintiffs also alleged that the declines began shortly before the Silver Fixing call started. Id. On days when the Fix Price moved downward from the prevailing price before the call, there was, on average, a 15 basis point drop in COMEX silver futures and spot silver prices at the start of the Silver Fixing. Id. Plaintiffs tied the Fixing Banks to this anomalous behavior by analyzing publicly-available trading data. According to Plaintiffs, on approximately 1900 days the Fixing Banks and defendant UBS quoted below-market prices for silver-denominated assets in the minutes leading up to and during the Silver Fixing. Id. at 545. Trading volume also increased significantly in the run up to the Silver Fixing. Id. For example, between 2007 and 2013, trading volume in COMEX silver futures began to increase just before the Silver Fixing and peaked during the Fixing call at more than three-times pre-Fixing volume. Id. During the same period, trades in COMEX silver futures successfully anticipated the direction of the Fix Price with 83.6% accuracy. Id. at 546; see also Id. (describing in detail statistical analysis showing volume spikes prior to and during the Silver Fixing). According to Plaintiffs, these trends are circumstantial evidence of trading by the Fixing Banks to take advantage of their advance knowledge of the Fix Price. Id. at 545.

         In Silver I, the Court denied the Fixing Banks' motion to dismiss and granted UBS's motion to dismiss. The Court concluded that the trading patterns identified by the Plaintiffs were evidence of parallel conduct consistent with a conspiracy. Id. at 559. Plaintiffs also alleged “plus factors”-facts that tend to show that parallel conduct was the result of an unlawful conspiracy rather than individual economically-rational decisions. Id. The structure of the Silver Fixing presented an opportunity for collusion: the trading volume spikes identified by Plaintiffs appeared to anticipate the Fix Price, whereas an efficient market would respond to the Fix Price after it was announced; and, given the strikingly consistent below-market prices quoted by the Defendants, it appears likely that on at least some occasions, individual Fixing Banks acted against their own self-interest. Id. at 561-62. The Court found that the same allegations stated a claim for manipulation under the Commodities Exchange Act (the “CEA”), 7 U.S.C. § 1 et seq. See Id. at 565.

         The Court also concluded that Plaintiffs had adequately alleged that they had “antitrust standing.” Id. at 552. Plaintiffs allege that they were injured by the Fixing Banks' conspiracy because they sold silver-denominated assets at artificially low prices caused by the Fixing Banks' alleged manipulation of the Silver Fixing. Id. at 551. Although the Silver Fixing itself can be distinguished from the markets for physical silver and silver-denominated assets, the Silver Fixing and the silver markets are “inextricably intertwined.” Moreover, the Court concluded that Plaintiffs were “efficient enforcers” because they sold silver investments on days the Fixing Banks allegedly manipulated the Silver Fixing. Id. at 555. Even if Plaintiffs did not deal directly with the Fixing Banks, the nature of the Defendants' alleged manipulation was market-wide and therefore had a sufficiently direct impact (at the motion to dismiss stage) on Plaintiffs' trades to provide standing. Id. By contrast, Plaintiffs made only limited allegations against UBS, which was not a part of the Silver Fixing and therefore did not have access to the same information. Id. at 575.

         On June 8, 2017, the Court granted leave to amend and file the Third Amended Complaint. See Dkt. 253 (“Silver II”). The TAC alleges a much broader conspiracy to manipulate the markets for physical silver and silver-denominated assets. According to Plaintiffs, Defendants' “comprehensive strategy” has three elements.[1] The first element is the Silver Fixing scheme described above and addressed at length in Silver I. Relying on chat messages between traders at Deutsche Bank and the other defendants (the “Deutsche Bank Cooperation Materials”), the TAC also alleges a scheme to manipulate the “bid-ask” spread in the market for physical silver and a scheme to manipulate the silver markets through coordinated trading and information sharing.[2] The TAC also added as defendants a handful of banks that were not involved in the Silver Fixing: Barclays Bank PLC (“Barclays”), BNP Paribas Fortis S.A./N.V. (“BNP Paribas”), Standard Chartered Bank (“Standard Chartered”), and Bank of America Corporation and its subsidiary unit Merrill Lynch, Pierce, Fenner & Smith Inc. (together, “BAML”) (collectively, the “New Defendants”).

         One of the means allegedly used by the Non-Fixing Banks to profit from their manipulation of the silver markets was manipulation of bid-ask spreads in the market for physical silver. Plaintiffs allege occasions on which traders at Deutsche Bank and UBS discussed how “wide” they would quote prices for 500, 000 ounces of silver, settling on a spread of 10 cents. TAC ¶ 230; see also TAC ¶¶ 231 (comparing spreads for different quantities of silver), 240 (“if they call me in 1 lac [100, 000 ounces of silver] I will quote 7-8 cents”). Traders at Barclays, BNP Paribas, HSBC, and BAML are alleged to have engaged in similar discussions with traders at Deutsche Bank. See TAC ¶¶ 232-43. For example, on July 4, 2008, in a conversation with a trader at Barclays, a London-based Deutsche Bank trader said, “just be wide.” TAC ¶ 239; see also TAC ¶ 240 (UBS trader told trader at Deutsche Bank “just quote wider”). Many of the chats involve a single trader at Deutsche Bank, who communicated with individual traders at each of the Non-Fixing Banks and was aware that the information he shared was proprietary and could be used to gain an advantage over other market participants. See TAC ¶ 238 (“[UBS]: 10 cents is ridiculous.” “[Deutsche Bank]: u shudnt have told me hahahaa[sic]hahahaha:D [smiley face].”). As the TAC explains, “wider spreads generated increased profits from Defendants' illegitimate market making activities at the expense of Plaintiffs and the Class by removing price competition and requiring that market participants pay an artificial price set by the cartel.” TAC ¶ 243.

         The TAC also alleges collusion in the silver markets by traders at each of the Non-Fixing Banks. Numerous chats between a trader at UBS and a trader at Deutsche Bank describe efforts to coordinate positions, TAC ¶¶ 253, 279; to time coordinated trades for maximum market impact, TAC ¶ 252 (“if we are correct and do it together, we screw other people harder”); and to employ manipulative techniques artificially to push the price of silver-denominated assets up or down, TAC ¶¶ 256-57, 259 (the “blade” and the “muscle”), 264 (“sniping”). Several of the chats between traders at UBS and Deutsche Bank refer to collusion with traders at other banks. For example, on March 31, 2011, a UBS trader shared a stop-loss position with Deutsche Bank and said “in one hour im gonna call reinforcement, ” i.e., another trader to help move the market price and trigger the stop-loss order. TAC ¶ 251. On June 8, 2011, the same UBS trader told the same Deutsche Bank trader that “we need to grow our mafia a lil get a third position involved, ” to which the Deutsche Bank trader responded, “ok calling barx.” TAC ¶ 250. On another occasion, the same Deutsche Bank trader added the UBS trader to a chat with traders at HSBC and Barclays, to which the UBS trader responded, “wow this is going to be the mother of all chats.” TAC ¶ 274; see also TAC ¶ 280 (describing information possibly learned from discussions with Bank of Nova Scotia).

         Traders at Barclays also shared information with Deutsche Bank. In addition to sharing information regarding bid-ask spreads, see TAC ¶ 233, a Barclays trader discussed another bank's attempt to “spoof” the silver markets on July 4, 2008. TAC ¶ 263; see also TAC ¶ 264 (Deutsche Bank and Barclays discussed “sniping”). On other occasions, traders at Barclays and Deutsche Bank compared positions and coordinated purchases. TAC ¶¶ 291-96. In one chat, a Barclays trader, referring to himself and a trader at Deutsche Bank, said “we are one team one dream.” TAC ¶ 295. Chats between Deutsche Bank and UBS also reference collusion with traders at Barclays. See TAC ¶¶ 250, 274.

         The Deutsche Bank Cooperation Materials also include messages between a trader at Deutsche Bank and traders at BNP Paribas. Several chats describe real-time sharing of market positions and conditions including bid-ask spreads quoted by BNP Paribas and Deutsche Bank's position heading into the Silver Fixing. TAC ¶¶ 236, 298-99, 306-07. Two of the chats between Deutsche Bank and BNP Paribas reference collusive trading techniques. See TAC ¶¶ 300 (BNP Paribas trader described taking the “bulldozer” out on a prior occasion - potentially a reference to triggering stop-loss orders), 310 (BNP Paribas trader suggested to Deutsche Bank trader that they go “smash” the Silver Fixing).

         A trader at Standard Chartered (and formerly of HSBC) also shared proprietary information with a trader at Deutsche Bank. The TAC includes only three chat messages involving Standard Chartered, but those chats include sharing of current trading positions, TAC ¶¶ 286-88, 290, and Deutsche Bank's position in the Silver Fixing, TAC ¶ 289.

         Finally, the TAC alleges six conversations between Deutsche Bank and BAML. One of the chats includes an exchange of information regarding bid-ask spreads. TAC ¶ 301. Deutsche Bank and BAML also shared information about the price level of stop-loss orders in the market, TAC ¶¶ 301-02, and their current positions in silver-denominated derivatives, TAC ¶ 303.[3]

         The Commodity Futures Trading Commission (the “CFTC”) and Department of Justice have recently undertaken enforcement actions directly relevant to Plaintiffs' claims against the Non-Fixing Banks. On January 29, 2018, the CFTC announced a settlement with UBS to resolve allegations that UBS traders “spoofed” the markets for precious metals and collaborated with traders at another financial institution to trigger stop-loss orders. See Dkt. 344 Ex. 1 (“UBS CFTC Order”). The CFTC consent order references specific instances of manipulation in the silver markets, including the COMEX futures market. See UBS CFTC Order at 3-5. UBS agreed to pay a $15 million monetary penalty to the CFTC. UBS CFTC Order at 11. Deutsche Bank settled similar claims with the CFTC on the same day for $30 million. See Dkt. 344 Ex.2 at 3-7, 13. The CFTC has also initiated civil proceedings against three individual traders at Deutsche Bank and UBS for alleged spoofing in the COMEX futures markets between 2008 and 2013.[4] Dkts. 344 Exs.4, 5. Meanwhile, the Department of Justice has charged two BAML traders with commodities fraud (among other things) in connection with alleged spoofing in the precious metals futures markets, including the COMEX silver futures market. See Dkt. 344 Ex.6 (the “BAML Complaint”). Plaintiffs are individuals and entities that transacted in physical silver and silver-denominated financial instruments during the class period. There are many silver-based derivatives, but Plaintiffs allege they traded in physical silver or silver bullion; Chicago Board of Trade (“CBOT”) silver futures; COMEX silver futures; COMEX “miNY” silver futures; New York Stock Exchange LIFFE mini silver futures; and CBOT “mini” silver futures. Appendix D to the TAC includes a list of days on which the price of silver was allegedly affected by Defendants' manipulative conduct on which Plaintiffs traded. The list in Appendix D does not specify whether Plaintiffs' alleged injury was the result of manipulation of the Silver Fixing, manipulation of bid-ask spreads for physical silver, or manipulative trading. The TAC also does not identify the counterparties to Plaintiffs' transactions. It is unclear whether any of the Plaintiffs dealt directly with any of the Defendants-much less dealt with a Defendant in an allegedly manipulated transaction or in the immediate wake of a manipulated transaction.

         The Non-Fixing Banks have moved to dismiss the TAC. They argue that the TAC's allegations of a “comprehensive” conspiracy among the Fixing Banks and Non-Fixing Banks are not plausible. The connection between an agreement to depress the Fix Price and information-sharing and collusion in the silver markets is not clear. Because of the Fixing Banks' complete control over the Silver Fixing, other conspirators and collusive trading were unnecessary to profit from foreknowledge of the Silver Fixing. Joint Mem. (Dkt. 303) at 9-10. None of the chat messages reference an agreement with the Non-Fixing Banks to fix the Silver Fixing. Joint Mem. at 11-12. As the Non-Fixing Banks point out, they are conspicuously absent from the TAC's allegations of parallel and below-market trading: “Of the roughly 850 trading days on which Plaintiffs allege the occurrence of spot price manipulation, Plaintiffs assert that two of the Non-Fixing Banks collectively submitted lower quotes around the Silver Fixing on just six purportedly illustrative days (representing less than 1% of the sample). Joint Mem. at 14.

         The Non-Fixing Banks also argue that Plaintiffs lack antitrust standing as to the Non-Fixing Banks. Because the Non-Fixing Banks' involvement in the conspiracy differs in important respects from the Fixing Banks, the Non-Fixing Banks contend that they are differently situated. They argue that because no Plaintiff alleges that he traded with the Non-Fixing Banks, there is only an indirect connection between Plaintiffs' trades and the market manipulation identified in the Deutsche Bank Cooperation Materials. Joint Mem. at 25. For the same reason, they assert that Plaintiffs' injuries are attenuated from the alleged collusion and are highly speculative. Joint Mem. at 26-27.

         With respect to Plaintiffs' claims pursuant to the CEA, the Non-Fixing Banks argue that Plaintiffs' claims are untimely because Plaintiffs were on notice of possible manipulation of the silver markets more than two years before they sought leave to amend in November 2017. Assuming Plaintiffs' claims are not time-barred, the Non-Fixing Banks contend in the alternative that Plaintiffs' allegations are insufficient because they do not adequately allege that the Non-Fixing Banks intended to manipulate the silver futures markets or that they were successful in doing so. The Non-Fixing Banks also contend that Plaintiffs' CEA claims are impermissibly extraterritorial because there is no alleged impact on a domestic market from the Non-Fixing Banks' manipulation.

         Failing these defenses, certain of the Non-Fixing Banks contend the Court lacks personal jurisdiction over them. UBS, Standard Chartered, BNP Paribas, and Barclays argue that Plaintiffs do not allege their involvement in any in-forum, suit-related misconduct.

         DISCUSSION

         In evaluating a motion to dismiss, the Court must “‘accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.'” Meyer v. JinkoSolar Holdings Co., 761 F.3d 245, 249 (2d Cir. 2014) (quoting N.J. Carpenters Health Fund v. Royal Bank of Scotland Grp., PLC, 709 F.3d 109, 119 (2d Cir. 2013)) (alterations omitted). Nonetheless, in order to survive a motion to dismiss, “a complaint must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Plausibility” is not certainty. Iqbal does not require the complaint to allege “facts which can have no conceivable other explanation, no matter how improbable that explanation may be.” Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 360 (2d Cir. 2013). But “[f]actual allegations must be enough to raise a right to relief above the speculative level, ” Twombly, 550 U.S. at 555, and “[courts] ‘are not bound to accept as true a legal conclusion couched as a factual allegation, '” Brown v. Daikin Am. Inc., 756 F.3d 219, 225 (2d Cir. 2014) (quoting Twombly, 550 U.S. at 555) (other internal quotations marks and citations omitted).

         I. Sherman Act Claims[5]

         Plaintiffs bring claims for price fixing, bid rigging, and conspiracy to restrain trade under Section 1 of the Sherman Act. Horizontal price fixing is, of course, per se illegal. United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 223-24 (1940). Claims for bid rigging, on the other hand, typically involve competitors conspiring to raise prices for purchasers-often, but not always, governmental entities-who acquire products or services by soliciting competing bids. See, e.g., Gatt Commcn's, Inc. v. PMC Assocs., LLC, 711 F.3d 68, 72-74 (2d Cir. 2013); State of N.Y. v. Hendrickson Bros., 840 F.2d 1065 (2d Cir. 1988). With regard to unlawful restraints of trade, “[b]ecause [Section] 1 of the Sherman Act does not prohibit [all] unreasonable restraints of trade . . . but only restraints effected by a contract, combination, or conspiracy, . . . [t]he crucial question is whether the challenged anticompetitive conduct stem[s] from independent decision or from an agreement, tacit or express.” Twombly, 550 U.S. at 553 (alterations in the original) (internal quotations and citations omitted). Regardless of whether Plaintiffs' allegations are evaluated in terms of price fixing, bid rigging or an unlawful restraint of trade, an unlawful agreement must be pleaded with respect to each antitrust claim brought under Section 1. See, e.g., In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (“To survive a motion to dismiss . . . a complaint must contain enough factual matter . . . to suggest that an agreement . . . was made.”)) (internal citations and quotations omitted).

         A. Allegations of an Overarching Agreement Involving the Silver Fixing

         To allege an unlawful agreement, Plaintiffs must plead either direct evidence (such as a recorded phone call or email in which competitors agreed to fix prices) or “circumstantial facts supporting the inference that a conspiracy existed.” Mayor & City Council of Baltimore v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013) (emphasis in original). Because conspiracies “nearly always must be proven through inferences that may fairly be drawn from the behavior of the alleged conspirators, ” the fact that Plaintiffs have no direct evidence does not mean there was no conspiracy. In re Foreign Exch. Benchmark Rates Antitrust Litig., 74 F.Supp.3d 581, 591 (S.D.N.Y. 2015) (“FOREX I”) (quoting Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012)). At the pleading stage, Plaintiffs “need not show that [their] allegations suggesting an agreement are more likely than not true or that they rule out the possibility of independent action . . . .” Gelboim v. Bank of Am. Corp., 823 F.3d 759, 781 (2d Cir. 2016) (quoting Anderson News, 680 F.3d at 184). Instead, “‘a well-pleaded complaint may proceed even if . . . actual proof of those facts is improbable, and . . . a recovery is very remote and unlikely' as long as the complaint presents a plausible interpretation of wrongdoing.” FOREX I, 74 F.Supp.3d at 591 (quoting Twombly, 550 U.S. at 556) (emphasis in original); see also Gelboim, 823 F.3d at 781 (“At the pleading stage, a complaint claiming conspiracy, to be plausible, must plead ‘enough factual matter (taken as true) to suggest that an agreement was made . . . .'” (quoting Anderson News, 680 F.3d at 184)).

         For the reasons discussed more fully below, the Court does not find Plaintiffs' allegations of a “comprehensive” conspiracy to be plausible. What Plaintiffs present as components of a single agreement appear to be unrelated, internally inconsistent efforts to manipulate the silver markets episodically. See Sonterra Capital Master Fund Ltd. v. Credit Suisse Grp. AG, 277 F.Supp.3d 521, 546 n.11 (S.D.N.Y. 2017) (“CHF LIBOR”) (rejecting inference of an overarching conspiracy to manipulate markets in Swiss-denominated LIBOR because “a group of defendants could have agreed to fix bid-ask spreads regardless of the CHF LIBOR rate, and vice versa, and there is no indication that the two conspiracies were part of one interwoven plot, as opposed to two separate sets of misconduct allegedly committed by the same entities.”); In re Zinc Antitrust Litig., 155 F.Supp.3d 337, 372-73 (S.D.N.Y. 2016) (rejecting inference of an overarching conspiracy where there was not a clear connection between various forms of manipulation). Even though the TAC plausibly alleges that the Fixing Banks conspired to depress the Fix Price, it does not explain why the Non-Fixing Banks, which are competitors and counterparties, would be in on the agreement. The coordinated trading alleged in the TAC lacks a connection to suppression of the Fix Price and, in fact, could have made it more difficult to profit from foreknowledge of the Fix Price.

         The TAC does not include any direct evidence of an agreement between the Non-Fixing Banks and the Fixing Banks involving the Silver Fix. The chat messages that reference the Silver Fixing do not reference or suggest an overarching scheme to depress the Silver Fix and many are inconsistent with Plaintiffs' theory that the Non-Fixing Banks had foreknowledge of the Fix Price. For example, chats between Deutsche Bank and BNP Paribas appear to involve sharing by Deutsche Bank of its anticipated position heading into the Silver Fixing. TAC ¶¶ 297-98, 310. The information in these messages could have been used by BNP Paribas to predict the direction of the Silver Fixing, but the messages do not suggest that BNP Paribas was part of an agreement to manipulate the Fix Price, and the fact that this information was worth sharing suggests that the result of the Silver Fixing was otherwise uncertain to BNP Paribas. Other chats reference apparently unilateral or bilateral attempts to manipulate the Silver Fixing. See TAC ¶¶ 307 ([Deutsche Bank]: “HE SPOOFED IT TO BUY IT AND I THINK HE JUST SOLD IT TO BUY IT . . . JUST LIKE THEM TO BID IT UP BEFORE THE FIX THEN GO IN AS A SELLER . . . .”), 308 ([UBS]: “oh ok did I tell u I saw a 300k loss on the fixing before too . . . started pushing too early lol”), 310 ([Deutsche Bank]: “I got the fix in 3 minutes” [BNP Paribas]: “I'm bearish . . . . Let's go and smash it together”), 311 ([Deutsche Bank]: “well you told me too but i told no one u just said you sold on fix” [UBS]: “we smashed it good”), 322. A few of the chats describe the results of the Silver Fixing, essentially after-action reports, and suggest that the chat participants did not have foreknowledge of the Fix Price. See TAC ¶ 289 ([Standard Chartered]: “what was that all aboyt” [Deutsche Bank]: “silver fix?” [Standard Chartered]: “yeah” [Deutsche Bank]: “I had 2 m to sell no one wanted it.”). The fact that the Non-Fixing Banks agreed, on occasion, to “smash” or “push” the Silver Fixing is inconsistent with being members of a broader conspiracy to depress the Fix Price.

         It is also hard to understand why the Fixing Banks, major market-makers with their own trading operations and collective control over the Silver Fixing, would involve numerous other market makers in their scheme. In re Zinc Antitrust Litig., 155 F.Supp.3d at 372 (finding that the fact that defendant and affiliated entities controlled a significant market share made it less likely they would involve non-affiliated entities in an anticompetitive scheme). This is particularly true because in the zero-sum world of commodities trading, the other banks were potentially counterparties at whose expense the Fixing Banks would have sought to profit.

         The manipulative techniques described in the Deutsche Bank Cooperation Materials also lack a connection to Plaintiffs' theory that the Fixing Banks conspired to depress the Fix Price. Coordinated trading could further the Fixing Banks' alleged conspiracy by masking otherwise suspicious changes in the price of silver-denominated assets. But the chats are not direct or circumstantial evidence of this theory. Because Plaintiffs did not include the time of the messages on which the TAC relies, it is impossible to tell from the TAC whether the manipulative trades being discussed were timed to conceal a reversion in the Fix Price.[6] The chats describe tactics that could move prices up or down and therefore are not necessarily consistent with a conspiracy, the goal of which was to suppress prices. See, e.g., TAC ¶¶ 257-59 (discussing the “muscle” and “blade” strategies, which could provide “artificial support for silver prices” and recommending that a trader hold-off on manipulation because “its gonna go fast like rollercoaster going up”). “Spoofing, ”-placing and then canceling orders to give an appearance of demand at a given price-can create artificial price pressure in either direction. See TAC ¶ 261 (spoofing causes artificial prices “either above or below where the market was trading”). “Pushing, ” “smashing, ” and “hammering” silver prices cause prices to fall (or to increase, TAC ¶¶ 307, 312), but are profitable because a trader “pushing” the market can trade at an artificial price, knowing that prices will revert to normal post-manipulation. See TAC ¶¶ 307-09, 320-21 (Deutsche Bank and UBS conspired to “push silver prices down through stop-loss orders to generate illegitimate profits by trading in advance of the ‘wave' created when prices shot back up.”). The profitability of those tactics is dependent on a reversion in prices, which is inconsistent with a conspiracy persistently to depress silver prices.

         Where direct evidence is lacking, an antitrust conspiracy may be plausibly alleged through circumstantial evidence. Circumstantial evidence includes parallel behavior and so-called “plus factors.” See Mayor & City Council of Balt., 709 F.3d at 136. “[P]lus factors include: (1) a common motive to conspire; (2) evidence that shows that the parallel acts were against the apparent individual economic self-interest of the alleged conspirators; and (3) evidence of a high level of interfirm communications.” Gelboim, 823 F.3d at 781 (quoting Mayor & City Council of Balt., 709 F.3d at 136) (internal quotation marks and additional citations omitted). In Silver I, the Court concluded that Plaintiffs' econometric analysis of the silver markets around the time of the Silver Fixing, along with evidence of motive and a readymade forum for collusion, plausibly alleged a conspiracy among the Fixing Banks to depress the Fix Price. 213 F.Supp.3d at 561-62. The Court finds that the TAC does not include similar facts as to the New Defendants.

         Plaintiffs do not present an econometric analysis of quotes from the New Defendants to tie them to the alleged conspiracy to suppress the Fix Price. Plaintiffs identified approximately 850 days on which they allege there was manipulation of the spot price of silver around the time of the Silver Fixing. See TAC App'x D. Reversions in the price of silver shortly before and during the Silver Fixing are circumstantial evidence of a conspiracy to depress the Fix Price because they indicate either foreknowledge of the direction of the Fix Price or an attempt to conceal the effect of manipulation of the Fix Price. See Silver I, 213 F.Supp.3d at 561-62. The TAC does not link the New Defendants to this pattern of below market quotes. On six days-out of 850 identified in the TAC-one or more of the Non-Fixing Banks submitted below-market quotes leading up to the Silver Fixing. One does not need to conduct sophisticated statistical analyses to conclude that such evidence is too slim a reed from which the Court could infer foreknowledge of the Fix Price. The New Defendants are not included in Plaintiffs' analysis of bid-ask spreads before and during the Silver Fixing. See TAC ¶¶ 223-229. As the New Defendants point out, the thesis of this analysis is that “[i]n stark contrast to the rest of the market the Fixing [Banks] and UBS never narrow[ed] their spread in response to the new information provided by the Silver Fix[ing].” Joint Mem. at 16 (quoting TAC ¶ 228) (emphasis in original). Implicitly, Plaintiffs concede that the New Defendants are a part of “the rest of the market”, and that their bid-ask spreads moved with the market in response to the Fix Price.

         Plaintiffs' allegations of unilateral and bilateral manipulative trading are evidence of collusion in the silver markets but are of limited value in suggesting a conspiracy to manipulate the Silver Fixing. Arguing to the contrary, Plaintiffs rely on In re High-Tech Employee Antitrust Litigation, 856 F.Supp.2d 1103 (N.D. Cal. 2012). In that case, plaintiffs alleged an overarching agreement not to compete for employees based on allegations that suggested the existence of six bilateral, but “virtually identical, ” agreements. Id. at 1119-20. In a boycott or refusal-to-deal case, like High-Tech Employee, bilateral agreements can be persuasive evidence of an overarching conspiracy because each agreement is economically rational only if other market participants are also involved. In other words, each bilateral agreement or unilateral action would be against the defendants' self-interest unless all of the participants were acting in concert. See, e.g., Grasso Enters., LLC v. Express Scripts, Inc., 2017 WL 3654434, at *5 (E.D. Mo. 2017) (individual refusal to deal only economically rational if a part of a broader conspiracy). In contrast, bilateral coordinated trading such as “smashing” and “pushing” the markets for silver-denominated assets would be profitable to the traders involved regardless of whether the conduct was connected to a broader agreement to manipulate the Fix Price. See Sullivan, 2017 WL 685570, at *25 (recognizing that “horizontal activity to fix the price of Euribor-based derivatives on a transaction-by-transaction basis” does not “overlap with the fixing of the Euribor” benchmark rate).

         Because manipulative trading could cause an increase in price-as Plaintiffs acknowledge-it is also possible that the manipulative trading alleged in the TAC would work at cross-purposes with a conspiracy to suppress the Fix Price. Cf. CHF LIBOR, 277 F.Supp.3d at 555 (“[I]t is harder to infer a conspiracy from individual acts of trader-based manipulation because large financial institutions are both buyers and sellers of derivative products, and thus any changes may well offset each other.”). The chat messages show that the Non-Fixing Banks used similar methods to manipulate the silver markets-potentially evidence of a broader agreement, see In re Interest Rate Swaps Antitrust Litig., 261 F.Supp.3d 430, 472-74 (S.D.N.Y. 2017)-but those methods bear little resemblance to Plaintiffs' theory that the Fixing Banks used the daily fixing call to agree on an artificially low Fix Price.[7] Plaintiffs also rely heavily on In re Foreign Exchange Benchmark Rates Antitrust Litigation, 2016 WL 5108131 (S.D.N.Y. 2016) (“FOREX III”). FOREX III also involved allegations of a broader conspiracy based on evidence of bilateral and group chat messages among traders, but it differs in critical respects. In FOREX I, the conspirators were alleged to have manipulated benchmark rates such as the WM/Reuters Closing Spot Rates through information sharing and coordinated trading in the foreign exchange markets in advance of the benchmark measurement. See FOREX III, 2016 WL 5108131, at *3. Because the conspirators in FOREX I were not a part of the benchmark-fixing process, they depended on coordinated trading and information sharing to accomplish their goal of manipulating the benchmark. Id. Given the means available to the conspirators, chat messages showing information sharing and coordinated trading among the defendants were highly relevant to plaintiffs' benchmark manipulation theory. There is no similar, close connection between manipulative trading, as evidenced in the Deutsche Bank Cooperation Materials included in the TAC, and the Silver Fixing process. The Silver Fixing (and the similar gold fixings) is sui generis insofar as a limited No. of market participants exercised control over the fixing process through a daily, unrecorded conference call. Accordingly, while the Court finds FOREX III relevant to determining whether a conspiracy existed among the Non-Fixing Banks, it does not suggest that Plaintiffs have plausibly alleged a comprehensive scheme among the Fixing Banks and Non-Fixing Banks to manipulate the Fix Price.

         B. Allegations of an Agreement among the Non-Fixing Banks

         While the TAC does not allege an “overarching” conspiracy among the Fixing Banks and Non-Fixing Banks, the Court finds that the chat messages contained in the TAC plausibly allege a conspiracy among the Non-Fixing Banks (and Deutsche Bank) to manipulate the markets for silver and silver-denominated financial assets opportunistically and to fix bid-ask spreads in the market for physical silver. Cf. In re Zinc Antitrust Litig., 155 F.Supp.3d at 368 (recognizing that allegations in antitrust complaint may allege multiple different, but overlapping conspiracies).

         The chat messages included in the TAC are direct evidence of an anticompetitive agreement to manipulate the silver markets.[8] See FOREX I, 74 F.Supp.3d at 591 (chat rooms and instant messages used to share pricing information and trading positions are direct evidence of an anticompetitive agreement). The Court is not persuaded by the Non-Fixing Banks' argument that these chat messages involve mere ex post information sharing or “inapposite” bilateral communications. Joint Reply Mem. (Dkt. 338) at 2. The chat messages cited in the TAC involve exchanges of current pricing information by horizontal competitors, see TAC ¶¶ 230-31, 236, 287-88, 301, 303, 306; sharing of real-time order flow information, see TAC ¶¶ 286, 289, 291-96, 298-99, 307; and coordinated use of manipulative trading strategies such as the “blade” and “muscle” and trading intended to trigger stop loss orders, see TAC ¶¶ 256-59, 264, 310. These are paradigmatic examples of communications relevant to a horizontal price-fixing scheme.[9] See FOREX I, 74 F.Supp.3d at 591; Sullivan, 2017 WL 685570, at *23-24 (identifying bilateral chat messages, primarily involving a trader at Deutsche Bank, as evidence of a broader conspiracy to manipulate the Euribor benchmark); CHF LIBOR, 277 F.Supp.3d at 553, 556 (concluding that chat messages were adequate to state conspiracy claim against the bank quoted in the chat messages); In re Libor-Based Fin. Instruments Antitrust Litig., 2015 WL 4634541, at *44 (S.D.N.Y. Aug. 4, 2015) (“LIBOR IV”) (sustaining complaint where Plaintiff identified “sporadic” examples of rate manipulation); cf. Todd v. Exxon Corp., 275 F.3d 191, 211-12 (2d Cir. 2001) (exchange of specific and current information related to prices is probative of anticompetitive behavior in a “data-exchange” case).

         Several of the chat messages refer to other Defendants, suggesting that market-manipulation was not limited to sporadic bilateral agreements. For example, a UBS trader told a Deutsche Bank trader that they needed to “grow our mafia a lil” by getting a “third position involved.” TAC ¶ 250. The Deutsche Bank trader responded by saying “ok calling barx [Barclays]” and reported that the Barclays trader had agreed to participate in the manipulation. TAC ¶ 250. The same traders participated in what one characterized as “the mother of all chats” involving traders at HSBC and Barclays. TAC ¶ 274. Other chats plausibly support an inference of a multilateral conspiracy. See TAC ¶ 251 (UBS trader told Deutsche Bank trader that “in one hour im gonna call reinforcement”). A single London-based Deutsche Bank trader appears to have played a clearinghouse role in the alleged conspiracy. This particular trader shared proprietary information, discussed manipulative trading, and agreed to fix prices with traders at each of the Non-Fixing Banks. See TAC ¶¶ 235-36, 238-39, 263, 288, 290, 297-306, 310. At this stage, Plaintiffs “need not show that ‘the defendant knew the identities of all the other conspirators, '” In re Interest Rate Swaps Antitrust Litig., 261 F.Supp.3d at 482 (quoting United States v. Huezo, 546 F.3d 174, 180 (2d Cir. 2008)), and it is plausible that the conspiracy operated through one or more well-connected traders without the knowledge of the other participants.

         The CFTC's settlements with UBS and Deutsche Bank, and the Department of Justice's prosecution of traders at Deutsche Bank and BAML are also evidence of a conspiracy. See FrontPoint Asian Event Driven Fund, L.P. v. Citibank, N.A., No. 16-CV-5263 (AKH), 2017 WL 3600425, at *10 (S.D.N.Y. Aug. 18, 2017) (considering regulator's findings of inappropriate behavior directed at improperly-influenced benchmark rates as evidence of a conspiracy); see also FOREX I, 74 F.Supp.3d at 592 (relying in part on regulatory enforcement actions to find plausible allegations of a conspiracy to fix benchmark rates).

         The chat messages are especially strong direct evidence of an anticompetitive agreement to quote artificially wide bid-ask spreads in the market for physical silver.[10] Traders at Barclays, HSBC, BNP Paribas, BAML, and UBS discussed bid-ask spreads with traders at Deutsche Bank. See TAC ¶¶ 231-43. Several of these chats include explicit agreements-such as when traders at Deutsche Bank and UBS agreed to quote a bid-ask spread of 10 cents on an order of 500, 000 ounces of silver. See TAC ¶ 230. One Deutsche Bank trader repeatedly urged traders at the other defendant banks to quote “wider, ” i.e., more profitable spreads. See TAC ¶¶ 239-40. As this trader forthrightly explained to a trader at UBS, “the price of liquidity is growing [and] u have to pass it on to the custys [customers].” TAC ¶ 238. Although these chats do not reference an agreement among the defendants, quoting artificially wide bid-ask spreads would not be economically rational without a broader agreement involving a critical mass of market participants. In this respect, the conspiracy alleged in the TAC is a traditional price-fixing conspiracy: it is easier to increase prices to customers if a critical mass of market participants is involved.

         Defendants' remaining arguments urge the Court to pick-and-choose between plausible inferences. Relying on the dearth of multi-bank chat messages in the TAC, Defendants argue that the Court should presume that any market-manipulation was bilateral and that there was no overarching agreement. Joint Reply Mem. at 4-5. The cases cited by Defendants for this point are summary judgment cases. See Dahl v. Bain Capital Partners, LLC, 937 F.Supp.2d 119, 135 (D. Mass. 2013); In re K-Dur Antitrust Litig., No. 01-CV-1652 (SRC), 2016 WL 755623, at *21-22 (D.N.J. Feb. 25, 2016). As discussed above, some of the chats reference other conspirators, and it is plausible that the conspiracy worked through a hub of one or more central wrong-doers. The involvement of other conspirators, providing additional “ammo, ” was also economically rational.[11] The Court also rejects Defendants' argument that because the chats do not demonstrate “systemic inter-firm communications by high-level executives, ” they are not indicative of an antitrust conspiracy. Joint Reply Mem. at 6. In a market manipulation case such as this, the traders at each bank are key. Whether these communications are sufficient to prove a single, unified conspiracy is a question for summary judgment or trial. As Judge Schofield explained in FOREX III, it is possible that bilateral or group chats were merely opportunistic attempts at collusion-rather than a part of an overarching conspiracy-but it is also plausible that the communications are evidence of a broader agreement. “Questions as to each Defendant's participation in the conspiracy and the conspiracy's scope may be raised later in litigation, but do not merit dismissal at this phase.” FOREX III, 2016 WL 5108131 at *4. Finally, Defendants contend the chat messages show sharing of price and order information but not market manipulation. The Court disagrees because many of the chat messages clearly discuss market manipulation, see, e.g., TAC ¶¶ 257-259, 263-266, or involve information sharing between horizontal competitors with no apparent purpose other than to coordinate positions, see, e.g., TAC ¶¶ 230-237, 252-53. In any event, it is plausible to infer an anticompetitive agreement from apparently regular sharing of current price and order information between horizontal competitors. See Gelboim, 823 F.3d at 781 (“‘The choice between two plausible inferences that may be drawn from factual allegations is not a choice to be made by the court on a Rule 12(b)(6) motion'”; an antitrust plaintiff “need not show that its allegations suggesting an agreement are more likely than not true or that they rule out the possibility of independent action.”) (quoting Anderson News, 680 F.3d at 184-85). To state the obvious, it is not rational for horizontal competitors to share current pricing information absent the existence of an anticompetitive agreement. See FOREX III, 2016 WL 5108131, at *4 (sharing of information “is against each bank's economic self-interest as a competitor absent collusion”).

         In sum, the Court does not find Plaintiffs' allegations of a single conspiracy among the Fixing Banks and Non-Fixing Banks to manipulate the Silver Fixing to be plausible. That said, the TAC plausibly alleges two conspiracies: Plaintiffs have plausibly alleged a conspiracy involving the Fixing Banks to suppress the Fix Price through the daily fixing call. Plaintiffs have also plausibly alleged a conspiracy among the Non-Fixing banks to collude in the silver markets through market manipulation and information-sharing. Whether Plaintiffs would be able to prove that the market manipulation alleged in the TAC was anything other than episodic and bilateral collusion among traders is unknown, but they have plausibly alleged the existence of a conspiracy.

         Because Plaintiffs' Sherman Act claim against the Non-Fixing Banks is plausible, the Court must consider whether Plaintiffs have “antitrust standing” to assert such a claim.

         C. Antitrust Standing

         Section 4 of the Clayton Act establishes a private right of action to enforce Section 1 of the Sherman Act. 15 U.S.C. § 15.[12] Applying the Supreme Court's decision in Associated General Contractors v. California State Council of Carpenters,459 U.S. 519 (1983) (“AGC”), the Second Circuit has held that “a private antitrust plaintiff [must] plausibly [ ] allege (a) that it suffered a special kind of antitrust injury, and (b) that it is a suitable plaintiff to pursue the alleged antitrust violations and thus is an ‘efficient enforcer' of the antitrust laws.” Gatt Commcn's, 711 F.3d at 76 (citations and internal quotations omitted). “‘Antitrust standing is a threshold, pleading-stage inquiry . . . .'” Id. at 75 (quoting NicSand, Inc. v. 3M Co.,507 F.3d 442, 450 (6th Cir. 2007) (en banc)). ...


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