September 14, 2011 7:04 pm
HSBC has been dropped from a lawsuit accusing banks of suppressing silver prices after reaching a temporary standstill agreement with plaintiffs’ attorneys.
The London-based bank’s removal leaves JPMorgan Chase as the lone defendant named in the case brought by dozens of silver investors and money managers.
The Commodity Futures Trading Commission in September 2008 disclosed that it was investigating misconduct in the silver market. The probe has not led to government charges.
However, last October, CFTC commissioner Bart Chilton took the matter into his own hands, announcing that “there have been fraudulent efforts to persuade and deviously control” silver prices.
Silver traders afterwards filed more than 40 lawsuits against HSBC and JPMorgan, based in part on the banks’ historically large portfolios of precious metals derivatives.
This week, plaintiffs’ attorneys consolidated the suits into a single complaint and sought class action status in federal court.
HSBC was omitted as a defendant in the amended complaint, made public on Wednesday, after entering into a “tolling agreement” with plaintiffs, the filing said. Such agreements extend the deadline for bringing lawsuits under US statute of limitations rules.
“A potential defendant may sign a tolling agreement with a plaintiff either because there are settlement discussions between the parties, or because the plaintiff is reviewing whether or not that party should actually be sued in the case,” said Peter Haveles, partner with law firm Kaye Scholer, who is not involved in the silver litigation.
HSBC acknowledged that the complaint made reference to a tolling agreement but declined to comment on the suit. “We will continue to vigorously defend ourselves in this area through all proper legal channels,” the bank said.
The complaint alleged that JPMorgan, on various occasions between 2007 and 2010, manipulated silver markets with “large, uneconomic sales to depress prices.” Plaintiffs said the bank intentionally drove silver futures lower “through large volume trades and ‘spoof orders’.”
By mid-2008, after JPMorgan had acquired the investment bank Bear Stearns, the value of its silver position increased at least $100m for each $1 per ounce decline in silver futures prices, the complaint said. In August 2008, the plaintiffs alleged, JPMorgan used “massive selling power” to force traders of put options to cover their positions.
JPMorgan said: “These allegations are entirely without merit and we intend to defend ourselves vigorously.”
