Lawsuit claims bank and HSBC placed large orders, then withdrew them
HSBC Holdings Plc and JPMorgan Chase & Co. were accused in an investor's lawsuit of placing “spoof” trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law.
The investor, Peter Laskaris, alleges that starting in March 2008, the banks colluded to suppress silver futures so that call options, or the right to buy, would decline, and put options for the right to sell would increase, according to the complaint filed yesterday in federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless, Laskaris claims.
The banks placed so-called spoof trading orders, or the “submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed,” according to the complaint.
The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008. At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been “fraudulent efforts to persuade and deviously control” silver prices and that violators should be prosecuted.
Joseph Evangelisti, a spokesman for New York-based JPMorgan, declined to comment. Juanita Gutierrez, a spokeswoman for London-based HSBC, also declined to comment.
Separate, Similar Complaint
A separate, similar complaint filed yesterday on behalf of investor Brian Beatty, and naming the same banks as defendants, claims a whistleblower contacted the CFTC last year and reported the banks' conspiracy to suppress prices of silver futures to profit from “enormous” short positions in silver futures.
The banks reduced their collusive trading and their holdings in the futures market after a government investigation of silver futures manipulation began in March, according to the complaint filed by Laskaris, which seeks class-action status. Since the banks cut back on their silver futures trading, prices have increased about 50 percent, the suit alleges.
“These price changes directly result, at least in one substantial part, from defendants' reduction in their concentration and other reductions of their unlawful activities in the silver markets since the government investigation,” according to the Laskaris complaint.
Comex Trades
Laskaris described himself as a New York resident who traded in silver futures and claims damages based on the collusion. The trades at issue in the complaint were made on the Commodity Exchange Inc. division of the New York Mercantile Exchange, Laskaris said in the complaint. Beatty, a resident of Connecticut, makes the same claim.
Christopher Lovell, a lawyer representing Laskaris, didn't immediately return a call seeking comment after business hours yesterday.
Chilton spoke at an Oct. 27 hearing in Washington on regulations to implement the Dodd-Frank financial overhaul, which became law in July and gave the commission a year to establish rules governing the $615 trillion over-the-counter derivatives market.
Silver futures for December delivery fell 42.6 cents, or 1.8 percent, to close at $23.404 an ounce on the Comex in New York yesterday. The price has gained 39 percent this year.
