December 22, 2014

WGF Investments, Deutsche Bank Securities, Royal Bank of Canada Subject to Fines for Securities Violations and Misconduct

FINRA Fines WGF Investments $700,000 for Supervisory Failures
The Financial Industry Regulatory Authority is fining WGF Investments $700,000 for failing to commit the attention, time, and resources to certain duties related to supervising registered representatives. WGF is a midsize independent brokerage firm.

According to the self-regulatory organization, from 3/07-1/14, WGF did not supervise private securities transactions of one representative and failed to keep up an adequate supervisory system to make sure that the customer transactions taking place were suitable. The broker-dealer also is accused of not properly supervising one representative’s alternative investment sales.

And, for over a year, WGF purportedly gave a rep a blanket waiver from having to comply with written supervisory procedures related to the sale of private equity, real estate investment trusts, and other alternative investments. A number of the rep’s clients invested over 25% of their liquid net worth in alternative investments, with certain clients putting in over 90%. Meantime, this rep, who is no longer with WGF, routinely spoke on the radio, making misleading and exaggerated statements abut both conventional and alternative investments while favoring the latter. WGF was cited for not properly supervising the radio broadcasts.

The firm is settling without denying or admitting to the FINRA charges.

Deutsche Bank Securities Ordered by CFTC to Pay $3M for Improper Investments and Supervisory, Reporting, and Recordkeeping Violations

Deutsche Bank Securities Inc. (DBSI) has agreed to settle U.S. Commodity Futures Trading Commission charges by paying a $3 million fine. The regulator says the firm did not properly invest customer aggregated funds, failed to put together and file financial reports that were accurate, neglected to keep up the necessary books and records, and committed supervisory failures. Fortunately no investors sustained losses.

According to the CFTC’s order, from 6/18/12 to 8/15/12 Deutsche Bank did not file accurate financial statements with the agency in a timely fashion. The firm purportedly lacked the automated processes to make sure that the financial reporting, some of which had errors, was accurate. Also, says the agency, from 6/18/12 through 8/15/12 Deutsche Bank did not accurately calculate how much there were in customer funds on deposit. Because of certain miscalculations, the firm invested customer funds in specific money market mutual funds during that time. The amounts exceeded the 50% asset-based concentration limit.

Royal Bank of Canada Must Pay $35M for Bogus Sales, Illegal Wash Sales, and Noncompetitive Transactions
A U.S. federal judge is ordering Royal Bank of Canada (RY) to pay a $35 million penalty for its involvement in over 1,000 illegal wash sales, fake sales, and noncompetitive transactions. The ruling comes out of a CFTC complaint in 2012 accusing the bank of wash sales and fictitious sales.

The agency accused senior Royal Bank of Canada personnel of designing a trading strategy that was partially created to generate tax benefits. The sales were noncompetitive transactions, which are prohibited under CFTC regulations.

Finra fines WFG Investments $700,000, Investment News, December 22, 2014

CFTC Orders Deutsche Bank Securities Inc. to Pay $3 Million to Settle Charges of Improper Investment of Customer Segregated Funds, Reporting and Recordkeeping Violations, and Supervision Failures, CFTC, December 22, 2014

Federal Court Orders Royal Bank of Canada to Pay $35 Million Penalty for Illegal Wash Sales, Fictitious Sales, and Noncompetitive Transactions
, CFTC, December 18, 2014

More Blog Posts:
Ex-Edward Jones is Criminally Charged with Bilking Disabled Woman of Over $160K, Stockbroker Fraud Blog, December 22, 2014

Credit Suisse Ordered to Pay $40M Verdict to Highland Capital, Institutional Investor Securities Blog, December 19, 2014

Moody’s Reduces American Realty Capital Properties Credit Rating to Junk Status, REIT’s Founder Nicholas Schorsch Steps Down, Institutional Investor Securities Blog, December 18, 2014

December 11, 2014

Citigroup, Credit Suisse, Deutsche Bank, Merrill Lynch, & Other Firms Ordered by FINRA to Pay $43.5M Over Activities Related to Toys “R” Us IPO

The Financial Industry Regulatory Authority is fining 10 firms $43.5 million in total for letting their equity research analysts solicit investment business and offering favorable research coverage related to the the planned Toys “R” Us initial public offering. The firms were fined: $2.5 million for Needham & Co. LLC; $4 million for Wells Fargo Securities, LLC (WFC), Deutsche Bank Securities Inc. (DB), Morgan Stanley & Co., LLC (MS), and Merrill Lynch, Pierce, Fenner & Smith Inc. respectively; and $5 million each for JP Morgan Securities LLC (JPM), Barclays Capital Inc. (BARC), Goldman Sachs & Co. (GS), Citigroup Global Markets Inc. (C), and Credit Suisse Securities USA LLC (CS). FINRA rules state that firms are not allowed to use research analysts or promise favorable research to garner investment banking business.

In 2010, Toys “R” Us and its private equity owners asked the ten firms to compete for involvement in an initial public offering. The self-regulatory organization said that all of the institutions used equity research analysts when soliciting for this role.

The company asked the analysts to create presentations to determine what their views were on certain issues and if they matched up with the perspectives of the firms’ investment bankers. The firms knew that how well their analysts did with this would impact whether or not they would be given the underwriting role in the IPO.

In the presentations, the firms explicitly or implicitly made known that they would provide reasonable research coverage in exchange for involvement in the IPO. While Toys “R” Us offered each firm a part in the IPO, ultimately the actual offering never went through. FINRA also said that Needham, Barclays, JP Morgan, Citigroup, Goldman Sachs, and Credit Suisse lacked the adequate supervisory procedures for research analyst involvement in investment banking pitches.

By settling, the firms are not denying or admitting to the charges. They are, however, consenting to an entry of the SRO’s findings.

FINRA also just fined Citigroup $3 million for its failure to deliver exchange-traded fund paperwork on over 250,000 customer purchases. The bank failed to send prospectuses on 160 ETFs that clients purchased in 2010 and on more than 1.5 million exchange-traded funds that were bought between 2009 and 2011. Over 250,000 brokerage clients were affected.

The self-regulatory organization said that Citigroup lacked the correct procedures to oversee this process. Instead, the bank depended on a manual system that was missing a definite chain of supervision to verify whether prospectuses had been sent. The firm discovered the issue in 2011, self-reporting to FINRA. Citi paid a $2.3 million for similar issues in 2007.

FINRA Fines 10 Firms a Total of $43.5 Million for Allowing Equity Research Analysts to Solicit Investment Banking Business and for Offering Favorable Research Coverage in Connection With Toys"R"Us IPO, FINRA, December 11, 2014

Citigroup Fined by Finra for Failing to Deliver ETF Prospectuses
, Bloomberg, December 12, 2014

More Blog Posts:
Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

Ex-Ameriprise Manager Who Helped with SAC Capital Insider Trading Case Settles Charges Against Her, Institutional Investor Securities Blog, December 9, 2014

CFTC, FINRA, and SEC Fight Investor Fraud Together, Stockbroker Fraud Blog, December 5, 2014

October 25, 2014

73 Swiss Banks Want the US to Modify Proposed Tax Amnesty Deals

Lawyers for 73 Swiss banks are questioning the terms of self-disclosure program that would allow them to achieve amnesty for having helped Americans avoid paying taxes to the U.S. government. In a request to the Justice Department, the attorneys objected to certain terms while recommending changes to the model accord.

The program wins bank participants a guarantee that they won’t be prosecuted if they disclose accounts belonging to Americans that had previously gone undeclared. While the bank could still be slapped with penalties the equivalent of up to half of what was in the hidden funds, they might be able to negotiate the amount down.

One of the requirements under the plan is that banks have to cooperate with other foreign or domestic law enforcement agencies that become involved in any probe over a tax evasion matter. However, Bloomberg reports, according to a number of the lawyers, this requirement wasn’t in the program when some 100 firms signed up so they could win non-prosecution deals in exchange for their cooperation. The banks claim that such a stipulation turns a program having to do with U.S. tax issues into a global agreement that doesn’t include guarantees or safeguards for them.

The banks want the program to ensure that the Internal Revenue Service doesn’t go after them if they reveal how they helped Americans to not pay taxes. They also are unhappy about the breadth of provisions related to breaches of the agreement.

Offshore accounts in Switzerland, Indian, Bermuda, Panama, Israel, the Cayman Islands, Liechtenstein, and Hong Kong already have been subject to criminal cases by the DOJ for tax evasion. The government has threatened to begin criminal probes against banks that don’t join the program.

Banks that are charged in criminal court would be jeopardizing their ability to hold deposits, make transactions in dollars for clients, and invest their assets in U.S. Securities, which could place their businesses in jeopardy. Wegelin & Co., a 270-year old bank, had to shut its doors after the U.S.indicted it for helping Americans evade paying their taxes. The bank filed a guilty plea last year.

Earlier this year, Credit Suisse Group AG (CS) was fined $2.6 billion after admitting it helped U.S. citizens evade taxes. In 2009, UBS AG (UBS) paid $780 million to settle charges that also were for helping Americans avoid paying taxes. The U.S. then sued UBS to get them to disclose the accounts. The bank disclosed 4,500 accounts to the government.

Earlier this month, Deutsche Bank AG (DB) also joined the self-reporting program. The bank recently drew scrutiny after The Wall Street Journal reported that the Federal Reserve Bank of New York found that the bank’s outfit in the U.S. suffered from financial reporting deficiencies.

Swiss banks urge U.S. to amend demands in tax amnesty deals, Chicago Tribune/Bloomberg, October 23, 2014

Deutsche Bank to Aid U.S. Justice Department in Swiss Tax Evasion Probe
, The Wall Street Journal, October 9, 2014

More Blog Posts:
Rajaratnam Brother Settles Insider Trading Charges Involving Hedge Fund Advisory Firm Galleon Management, Stockbroker Fraud Blog, October 23, 2014

Wells Fargo to Pay $5M Over Inadequate Controls, Altered Documents, Institutional Investor Securities Blog, October 21, 2014

FINRA Bars Ex-Wells Fargo Broker From Industry For Allegedly Bilking Customers, Expels HFP Capital Markets LLC for Securities Fraud, Stockbroker Fraud Blog, September 19, 2014

October 14, 2014

Barclays to Pay $20M To Settle Libor Manipulation

Barclays PLC (BARC) has consented to pay $20 million to settle complaints over the manipulation of the London interbank offered rate benchmark. As part of the accord, the bank will cooperate with a group of Eurodollar-futures traders that have filed lawsuits against other banks over Libor manipulation.

The deal resolves claims by firms and individuals that traded in Eurollar futures contracts and options on exchanges that were Libor based from 1/1/05 to 5/31/10. Now, a district court judge in Manhattan must approve the settlement.

This is the first settlement reached in the U.S. antitrust litigation involving investments linked to Libor. In addition to paying the $20 million, Barclays will help traders with their claims against other banks. This will include giving documents and information and other support to the plaintiffs so that they can bolsters their cases.

Authorities around the world have been looking into claims that over a dozen banks modified the submissions for establishing Libor and other benchmarks to make money from bets on interest-rate derivatives or cause their finances look more robust. In 2012, U.K. and U.S. authorities fined Barclays $469 million related to benchmark rate manipulation.

Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), and Citigroup (C) are some of the other banks that were sued over allegedly manipulating Libor.

Meantime, regulators are trying to reach a settlement over rate-rigging allegations made against Deutsche Bank AG (DBK). According to The New York Times, U.S. prosecutors are considering whether to get the bank to plead guilty to interest-rate rigging.

Also under investigation of suspected wrongdoing related to currency manipulation are UBS (UBS), JPMorgan Chase, Barclays (BARC), Citigroup, and several other banks. Past resolved cases against these firms could be opened up if any misconduct was discovered that potentially violated earlier settlements related to interest rate manipulation.

Meantime, in the United Kingdom, the Financial Conduct Authority may be close to reaching settlements with JPMorgan, Citigroup, HSBC (HSBC) the Royal Bank of Scotland, and UBS. The agreement could potentially be a collective one.

U.S. May Press Deutsche Bank for Guilty Plea on Libor, NYT Says, Bloomberg, October 6, 2014

Barclays to pay $20 million to settle U.S. class action over Libor, Reuters, October 8, 2014

More Blog Posts:
NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool, Stockbroker Fraud Blog, June 26, 2014

Virginia Files $1.15B Securities Lawsuit Against Citigroup, Credit Suisse, JPMorgan Chase, and Other Big Banks, Institutional Investor Securities Blog, September 27, 2014

Barclays to Pay $15M SEC Settlement Over Compliance Failures Following Lehman Brothers Acquisition, Pays $61.7M Fine to U.K.'s FCA Over Client Asset Issues, Institutional Investor Securities Blog, September 24, 2014

October 11, 2014

Credit Suisse, Goldman Sachs, JPMorgan, and 16 Other Banks Agree to Swaps Contract Modifications to Assist Failed Firms

JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBA), Goldman Sachs Group Inc. (GS), Credit Suisse (CS), and fourteen other big banks have agreed to changes that will be made to swaps contracts. The modifications are designed to assist in the unwinding of firms that have failed.

Under the plan, which was announced by the International Swaps and Derivatives Association, banks’ counterparties that are in resolution proceedings will postpone contract termination rights and collateral demands. According to ISDA CEO Scott O’Malia, the industry initiative seeks to deal with the too-big-to-fail issue while lowing systemic risks.

Regulators have pressed for a pause in swaps collateral collection. They believe this could allow banks the time they need to recapitalize and prevent the panic that ensued after Lehman Brothers Holdings Inc. failed in 2008. Regulators can then move the assets of a failing firm, as well as its other obligations, into a “bridge” company so that derivatives contracts won’t need to be unwound and asset sales won't have to be conducted when the company is in trouble. Delaying when firms can terminate swaps after a company gets into trouble prevents assets from disappearing and payments from being sent out in disorderly, too swift fashion as a bank is dismantled.

After Lehman’s bankruptcy filing, it still had tens of thousands of individual derivative positions. Trading partners tried to close out swaps trades with the firm right away, even demanding their collateral back. Because of this, billions of dollars of swap-termination payments were issued.

Current U.S. bankruptcy laws exempt swaps and other derivatives from the stay that prevents creditors of a firm that has failed from collecting on what they are owed right away. Banks’ swap counterparties, however, have been able to move fast to grab collateral.

ISDA has changed the language in a standard swaps contract following concerns from U.S. regulators that close-out derivatives transactions could slow resolution efforts. The changes allow banks to get involved in overseas resolution regimes that might only have been applicable to domestic trades.

The deal with the banks stretches out delays or stays to 90% of what is outstanding of notional value of derivatives. The firms have agreed in principal to wait up to 48 hours before canceling derivatives contracts and collecting payments from firms that are in trouble.

Establishing a credible plan to unwind failed banks could get rid of the impression that governments will rescue firms if they become too big too fail.

The other banks that have consented to this agreement:
· Bank of America (BAC)
· Bank of Tokyo-Mitsubishi UFJ
· Sumitomo Mutsui Financial Group Inc.
· Societe Generale SA (GLE)
· Barclays Plc (BARC)
· Royal Bank of Scotland Group Plc
· BNP Paribas SA (BNP)
· Nomura Holdings Inc.
· Citigroup Inc. (C)
· Mizuho Financial Group. Inc.
· Credit Agricole SA (CA)
· Morgan Stanley (MS)
· Deutsche Bank AG (DBK)

The Wall Street Journal says that under the agreement, firms are agreeing to forfeit certain rights that exist with their current contracts.

Banks Back Swap Contracts That Could Help Unwind Too-Big-to-Fail, Bloomberg, October 11, 2014

Banks Ink Swaps Deal With U.S. Regulators
, The Wall Street Journal, October 12, 2014

International Swaps and Derivatives Association

More Blog Posts:
Securities Fraud: Ex-Ameriprise Adviser to Pay $3M for Ponzi Scam, Four Insurance Agents Allegedly Defrauded Senior Investors, and Trading in Nine Penny Stocks is Suspended, Stockbroker Fraud Blog, October 8, 2014

As SEC Examines Private-Equity Consultant Salaries, Blackstone Stops Monitoring Fees, Institutional Investor Securities Blog, October 8, 2014

Private Equity Firms, Including Blackstone, Settle ‘Club Deals’ Case with $325M Settlement, Stockbroker Fraud Blog, August 9, 2014

September 4, 2014

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix

The Alaska Electrical Pension Fund is suing several banks for allegedly conspiring to manipulate ISDAfix, which is the benchmark for establishing the rates for interest rate derivatives and other financial instruments in the $710 trillion derivatives market. The pension fund contends that the banks worked together to set the benchmark at artificial levels so that they could manipulate investor payments in the derivative. The Alaska fund says that this impacted financial instruments valued at trillions of dollars.

The defendants are:

Bank of America Corp. (BAC)
Deutsche Bank (DB),
• BNP Paribas SA (BNP)
Citigroup (C)
• Nomura Holdings Inc. (NMR)
Wells Fargo & Co. (WFC)
Credit Suisse (CS)
JPMorgan Chase & Co. (JPM)
• HSBC Holdings Plc. (HSBA)
Goldman Sachs Group (GS)
• Royal Bank of Scotland Group Plc (RBS)
• Barclays Plc (BARC)

The banks are accused of using electronic chat rooms and other private means to communicate and colluding with one another by submitting the same rate quotes. The manipulation was allegedly intended to keep the ISDAfix rate “artificially low” until they would reverse its direction once the reference point was established.

The Alaska fund said the rigging was an attempt by the banks to make money on swaptions with clients looking to hedge against interest rate fluctuations. The defendants purportedly wanted to modify the swaps’ value because the ISDAfix rate determines other derivatives’ prices, which are used by firms, such as the fund. The rigging allegedly occurred via rapid trades just before the rate was established. ICAP, a British broker-dealer, was then compelled to delay the trades until the banks shifted the rate. Meantime, the brokerage firm, which is also a defendant in this lawsuit, would post a rate that did not accurately show the market activity.

The Alaska fund is adamant that the submission of identical numbers by the banks when they reported price quotes to establish ISDAfix could not have occurred without the financial institutions working together, which it believes occurred almost daily for over three years through 2012. It wants to represent every investor that participated in interest rate derivative transactions linked to ISDAfix between 01/06 through 01/14. The Alaska fund wants unspecified damages, which, under U.S. antitrust law, could be tripled.

Investors and companies utilize ISDAfix to price structured debt securities, commercial real estate mortgages, and other swap transactions. At The SSEK Partners Group, our securities lawyers represent pension funds and other institutional investors that have been the victim of financial fraud and are seeking to recoup their losses. Your case consultation with us is a free, no obligation session. We can help you determine whether you have grounds for a securities claim or lawsuit. If we decide to work together, legal fees would only come from any financial recovery.

An Alaska pension fund sues banks over rate manipulation allegations, Reuters, September 4, 2014

Barclays, BofA, Citigroup Sued for ISDAfix Manipulation, Bloomberg, September 4, 2014

More Blog Posts:
Lloyds Banking Group to Pay $370M Fine Over Libor Manipulation, Institutional Investor Securities Blog, July 29, 2014

Lloyds, Barclays, to Set Aside Hundreds of Millions of Dollars for Allegedly Mis-Selling to Victims, Stockbroker Fraud Blog, August 27, 2013

Texas Money Manager Sued by SEC and CFTC Over Alleged Forex Trading Scam, Stockbroker Fraud Blog, August 6, 2013

August 9, 2014

Regulators Tell Deutsche Bank to Enhance Its Risk Controls and Reporting Systems

The Federal Reserve Bank of New York and the state’s Department of Financial Services want Deutsche Bank AG (DB) to improve its technology and compliance procedures and get rid of risk-management deficiencies. The U.S. regulators made the demand to the financial institution via a private memorandum.

The Wall Street Journal says the confidential pact went into effect two years ago. While it doesn’t appear that regulators plan to take other action against Deutsche Bank over this matter, the New York Fed did give the financial institutional a deadline of the middle of 2015 to remedy a number of priority issues. Sources tell The WSJ that there is worry that reporting or trading mistakes by the bank could result in bigger, unplanned losses for the financial institution and even impact the market.

The Wall Street Journal recently reported that the New York Fed discovered that Deutsche Bank’s U.S. operations has known that it had serious financial reporting problems for years but did nothing to remedy the matter. Last year, New York Fed senior vice president Daniel Muccia sent a letter to the bank's executives saying that the firm's reports were not accurate and of poor quality. The extent of their errors was such that “wide-ranking remedial action” is needed. Muccia called the deficiencies a “systemic breakdown." He said that the regulator has been worried about Deutsche Bank’s US outfit for years.

New York’s Department of Financial Services wants to place government monitors in Deutsche Bank. The initiative is part of the regulator’s growing examination of the foreign-exchange market to determine whether manipulation is occurring. Barclays (BARC) has also been singled out for extra observation.

Meantime, the U.S. Commodity Futures Trading Commission wants Deutsche Bank to modify its systems, including make fixes to transaction reporting problems that could be place the firm, and possibly its trading partners, at greater risk. Bank officials said that they’ve been working to tackle compliance and technology problems and enhance systems and controls, including those involved with daily transaction reports and real-time trade confirmations.

Meantime, the bank also faces scrutiny abroad. BaFin, the financial regulator in Germany, is looking into possible interest-rate manipulation involving Deutsche Bank. Ernst & Young LLP is trying to determine when Anshu Jain, the bank’s co-CEO, first found out about the potential manipulation. In 2013, Deutsche Bank agreed to pay a fine of 725 million euros from manipulating Libor-linked interest rates.

Our institutional investor fraud lawyers are here to help our clients recoup their losses. The SSEK Partners Group represents high net worth individuals and different types of institutional investors.

Deutsche Bank Ordered by U.S. Regulators to Improve Reporting Systems, Risk Controls, The Wall Street Journal, August 7, 2014

Deutsche Bank to RBS Fined by EU for Rate Rigging, Bloomberg, December 4, 2013

More Blog Posts:

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

Deutsche Bank, UBS Being Probed Over Dark Pools & High-Frequency Trading, While An Investor Sue Barclays, Institutional Investor Securities Blog, July 30, 2014

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions, Institutional Investor Securities Blog, July 17, 2014

July 30, 2014

Deutsche Bank, UBS Are Probed Over Dark Pools & High-Frequency Trading, While An Investor Sue Barclays

Deutsche Bank AG (DB) and UBS AG (UBS) have disclosed that they are cooperating with regulators investigating dark pool trading venues and high frequency trading venues. Currently a number of banks are under investigation.

UBS says that among those probing its dark pool operation, which is consider the largest in the U.S. according to trade volume, are the Financial Industry Regulatory Authority, the U.S. Securities and Exchange Commission, and New York Attorney General Eric Schneiderman. The bank says it is one of many defendants named in related class action lawsuits over dark pool trading.

Meantime, Deutsche Bank also says that it too has gotten requests from certain regulators for data about high frequency trading. The bank’s dark pool is known as the SuperX European Broker Crossing System. Deutsche Bank is a defendant in a class action case claiming that high frequency trading may have violated U.S. securities laws.

The Wall Street Journal says that Credit Suisse (CS), another large dark pool operator, hasn’t disclosed that it was specifically asked for information about its trading system. However, its CEO, Brady Dougan, recently told reporters that the bank is “cooperating on a lot of those discussions.”

Dark Pools
Dark pools let investors sell and buy shares anonymously. This allows them to conceal their trading activities from competitors who might otherwise bet against them. Dark pools are where institutional investors can look for big blocks of shares without anyone knowing. This is done to decrease any price impact so as to garner a better deal. Recently, however, regulators have been worrying that the lack of transparency in these trading venues may give some traders an unfair advantage.

As our dark pool fraud law firm has reported before, New York’s attorney general sued Barclays (BARC) PLC . Schneiderman claims the bank showed preference to high-frequency traders in its Barclays LX dark pool while making it seem otherwise.

Barclays is seeking to have the case dismissed. The bank claims that misleading data was used in the complaint. Since the dark pool lawsuit was submitted, several of Barclays' clients have left and the number of trades in Barclays LX has significantly gone down. A day after Schneiderman sued, Barclays dropped 7.4% in New York trading.

Now, an investor is suing Barclays because of the drop in share prices. The plaintiff, Barbara Strougo, says that she and other Barclays American Depositary share buyers lost funds.

Strougo wants to sue for all the investors that purchased Barclays ADSs from 8/2/11 to 6/25/214. She believes the bank falsified marketing collateral to conceal the extent to which high-frequency traders were active on the dark pool. She is also accusing Barclays of not disclosing that when these traders were purportedly favored over other LX clients, the bank made revenue that was “significant.”

Deutsche Bank, UBS Sucked Into Dark-Pools Trading Probe, The Wall Street Journal, July 30, 2014

Barclays Sued by Investor Over Losses From Dark Pool Suit, Bloomberg, July 28, 2014

U.S. regulators looking into UBS, Deutsche Bank speed trading operations, Reuters, July 29, 2014

More Blog Posts:
Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions, Institutional Investor Securities Blog, July 17, 2014

Investors Pursue UBS's Puerto Rico Brokerage Over Closed-End Bond Funds, Stockbroker Fraud Blog, July 23, 2014

July 17, 2014

Barclays and Deutsche Bank Under Scrutiny Over Barrier Options Transactions

The U.S. Senate Permanent Subcommittee on Investigations plans to conduct a hearing over what it believes are abusive transactions made by financial institutions. Bloomberg is reporting that Deutsche Bank AG (DBK), Barclays PLC (BARC), and hedge fund manager Renaissance Technologies LLC will have representatives testifying at the hearing.

The July 22 hearing is expected to focus on barrier options transactions between the banks and the hedge fund manager. There are tax benefits that allegedly came from the options, which the Internal Revenue Service and Renaissance are in dispute over.

Bloomberg reports that the transactions let the hedge fund manager’s Medallion fund borrow up to $17 for every dollar the fund owned, which is more than it could have in a traditional margin-lending relationship. Under Federal Reserve rules, stockbrokers are not allowed to lend over $1 for each client money dollar. Usually, hedge funds can borrow no more than $5 or $6 for each dollar it has and only if there is a special agreement with the banks.

In one type of barrier-option transaction, Barclays purchased a pool of securities and paid Renaissance a small fee to run them. It then put the securities in Palomino Ltd., a subsidiary.

Barclays also sold a two-year option to the hedge fund that moved any losses or gains from the pool to Medallion without financing expenses. Since the bank legally owned the assets, the option changed the short-term trading profits of the hedge funds’ investors into long-term capital gains, which have a lower tax rate. The IRS claims the option deal was a deception and that Medallion was the actual owner of the assets.

Meantime, Deutsche Bank sold options to Renaissance not unlike the ones that Barclays provided. It also sold a similar structure to an investment vehicle under the management of hedge-fund manager George A. Weiss.

According to a Government Accountability Office report, the IRS found out about the options arrangement practices after Securities and Exchange Commission did in 2008. In 2010, the IRS made a case against the technique. Bloomberg say that according to sources, Deutsche Bank then stopped offering option arrangement transactions that offered a tax benefit.

In other Barclays news, trading is down in its dark pool after New York prosecutors accused the financial firm of misleading clients. The state’s attorney general claims that Barclays fraudulently misled customers about the way its LX dark pool was run. After the dark pool lawsuit was submitted, other brokers, including Deutsche Bank, Credit Suisse (ADR), and Royal Bank of Canada (RY) started closing their links to LX and taking it out of routing algorithms.

As for Deutsche Bank, the U.S. Court of Appeals for the Second Circuit has dismissed an appeal by plaintiffs accusing Deutsche Bank National Trust Company and its trusts of residential mortgage-backed securities fraud. The complaint questioned the defendants’ ownership of the loans and mortgage. The plaintiffs had mortgaged their homes and borrowed money. Now, they are challenging the defendants’ rights to collect payment on the loans and start foreclosures proceedings when payments weren't made.

The plaintiffs believe the assignments were defective because the mortgage loans could not be found listed in the attachments that came with the assignment agreements. In their appeal, they said that the district court made a mistake in tossing their complaint.
Now, however, the Second Circuit has concluded that the plaintiffs’ alleged facts don’t give them standing to go after their claims. The appeals court affirms the district court’s judgment to dismiss.

Barclays, Deutsche Facing U.S. Senate Hearing, Bloomberg, July 16, 2014

Trading in Barclays Dark Pool Down 37%, The Wall Street Journal, July 14, 2014

Second Circuit dismisses class action against Deutsche Bank, Washington Examiner, July 14, 2014

More Blog Posts:
NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool, Stockbroker Fraud Blog, June 26, 2014

Deutsche Bank, Wells Fargo, Citigroup Sued by Pimco and Blackrock Over Trustee Roles Involving Mortgage Bonds, Institutional Investor Securities Blog, July 3, 2014

Deutsche Bank AG Settles Shareholder Lawsuit Over Mortgage Debt, Stockbroker Fraud Blog, January 2, 2014

July 3, 2014

Deutsche Bank, Wells Fargo, Citigroup Sued by Pimco and Blackrock Over Trustee Roles Involving Mortgage Bonds

Pacific Investment Management Co. and BlackRock Inc. (BLK) are leading a group of investors, including Charles Schwab Co. (SCHW), Prudential Financial Inc. (PRU), DZ Bank AG, and Aegon in suing trust banks for losses they sustained related to over 2,000 mortgage bonds that were issued between 2004 and 2008. Defendants include units of US Bancorp (USB), Deutsche Bank AG (DBK), Wells Fargo (WFC), HSBC Holdings (HSBA.LN), Citigroup (C), and Bank of New York Mellon Corp (BK).

The investors are accusing the banks of breaching their duty as trustee when they did not force bond issuers and lenders to buy back loans that did not meet the standards that buyers were told the bonds possessed. It is a trustee’s job to make sure that principal payments and interest go to bond investors. They also need to make sure that mortgage servicing firms are abiding by the rules that oversee defective loans or homeowner defaults.

Trustees, however, have said that their duties are restricted to tasks like supervising the way payments are made to investors and giving regular reports about bond servicing. They disagree about having a wider oversight duty to fulfill.

Blackrock and Pimco contend that the trustees knew the bonds had defective loans but that they had a conflict because the issues who appointed them had stakes in the firms servicing the loans. Loans in the bonds that were issued by the defendants included subprime lenders Morgan Stanley (MS), Countrywide Financial Corp, First Franklin Financial Corp, New Century Financial Corp., Royal Bank of Scotland Group (RBS), Goldman Sachs Group (GS), and PLC's Greenwich Capital.

Investors have already won settlements from JPMorgan Chase Co. (JPM) and Bank of America Corp. (BAC) for the banks’ part in originating and selling mortgage securities. The trustee lawsuit deals with bonds that were not part of this settlement. The plaintiffs want damages for bond losses that exceeded $250 billion.

BlackRock, Pimco Sue Deutsche Bank, U.S. Bank Over Trustee Roles, The Wall Street Journal, June 18, 2014

BlackRock, Pimco Sue Banks for Mortgage-Bond Trustee Role, Bloomberg, June 18, 2014

More Blog Posts:

PNC Bank Sues Morgan Stanley & Ex-Trust Adviser For “Surreptitious Conspiracy”, Institutional Investor Securities Blog, April 3, 2014

US Supreme Court Will Hear Appeal Over Libor Antitrust Claims, Institutional Investor Securities Blog, July 2, 2014

FINRA Official Says Variable Annuity Sales Top Investor Complaint List, Stockbroker Fraud Blog, July 3, 2014

January 2, 2014

Deutsche Bank AG Settles Shareholder Lawsuit Over Mortgage Debt

Deutsche Bank AG (DB) has settled a securities lawsuit filed by shareholders accusing the financial institution of misrepresenting the degree of risk it could manage related to mortgage debt before the financial crisis of 2008. The deal, of which the terms have not yet been revealed, were disclosed in a filing made by the firm’s lawyers in the U.S. District Court in Manhattan.

Shareholders, including two mutual funds and the Building Trades United Pension Trust Fund of Elm Grove, claim Deutsche Bank misled them about the management of risk and the underwriting on the mortgage debt that it put together and sold. They also contend that the firm was too slow to take write-downs. They believe that this resulted in an 87% decline in the bank’s share price between May 2007 and January 2009.

They also claim that Deutsche Bank maximized its profit at risk to investors, even as it failed to appraise these customers of the risks they were taking on. When the financial markets failed, it was investors that ended up paying the price.

The securities agreement was reached in the wake of a US district judge refusing to let the shareholder lawsuit become a class action case. Judge Katherine Forrest said that there were problems with the methods and conclusions arrived at by an expert that the plaintiffs had retained.

The settlement comes right after Deutsche Bank agreed to pay $1.9 billion to the Federal Housing Finance Agency over the mortgage-backed securities it sold to Fannie Mae and Freddie Mac. FHFA believes that the bank and other financial firms misled the two government-sponsored mortgage companies about borrowers’ creditworthiness and the quality of loans. It also contends that the firms sold Fannie and Freddie flawed securities.
(The two entities, which sold these mortgage as securities to investors, suffered huge mortgage losses when the economic crisis struck in 2008.)

Also, Deutsche Bank, along with others banks, has just agreed to settle with the European Union over interbank offered rate manipulation allegations. The banks are accused of manipulating the Yen London interbank offered rate and the Euribor. Of the $2.3B in total that is to be paid, $992 million will come from Deutsche Bank.

At The SSEK Partners Group, our securities lawyers are still working with institutional and individual investors to get their money back from this tumultuous time in our economic history.

Contact our securities fraud lawyers to request your free case consultation. You may have grounds for a claim involving mortgage-backed securities, residential mortgage-backed securities, auction-rate securities, real estate investment trusts, municipal bonds, and other financial instruments. You want to work with an experienced law firm that knows how to pursue your claim and is not afraid to go after the big banks.

Deutsche Bank Reaches Settlement With US Shareholders, Dow Jones, January 3, 2014

Deutsche Bank, U.S. shareholders settle lawsuit over mortgages
, Reuters, January 2, 2014

More Blog Posts:
Deutsche Bank to Pay $1.9B to FHFA Over Mortgage-Backed Securities Sold to Freddie Mac and Fannie Mae, Institutional Investor Securities Blog, December 26, 2013

Deutsche Bank, Royal Bank of Scotland Settle & Others for More than $2.3B with European Union Over Interbank Offered Rates, Institutional Investor Securities Blog, December 24, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

December 26, 2013

Deutsche Bank to Pay $1.9B to FHFA Over Mortgage-Backed Securities Sold to Freddie Mac and Fannie Mae

Deutsche Bank (DB) will pay the Federal Housing Finance Agency $1.9 billion to settle securities claims that it misled Freddie Mac and Fannie Mae about the quality of loans bundled with mortgage-backed securities. Of the settlement, Fannie will get $300 million and Freddie will get $1.6 billion. However, this MBS settlement does not resolve a separate lawsuit filed by the two government-sponsored enterprises against Deutsche Bank and other firms over losses from the alleged manipulation interest rate.

FHFA claims that prior to the financial crisis, a number of financial institutions misled the two mortgage companies about borrowers’ creditworthiness. It wants to get back the $196 million Freddie and Fannie paid to buy what were supposed to be private label MBS.

The regulator says that losses sustained by Freddie and Fannie were from MBS that came from financial institutions selling flawed securities due to home loans in the bonds being more high risk than what the banks said they were. Although Freddie and Fannie didn’t make the loans directly they bought the mortgages from banks and sold them as securities to investors and provided guarantees. When the housing market exploded the two of them bought securities that were privately issued as investments. They also became two of the biggest bond investors. Unfortunately, when the economic crisis eventually hit in 2008, Freddie and Fannie suffered huge mortgage losses. The US Treasury had to lend them over $150 billion just so they could keep running.

Now, since suing 18 banks and financial institutions two years ago, the government agency has collected $885 million from UBS (UBS) and over $5 billion from JPMorgan Chase (JPM). It also settled with General Electric, Ally Financial, and Citibank, although the terms have not been disclosed terms. Among those that have yet to settle are Bank of America (BAC) and its Countrywide Financial and Merrill Lynch (MER).

Just recently, U.S. District Judge Denise Cote of the United States District Court for the Southern District of New York issued a decision undercutting the potential defenses of banks against certain FHFA brought-state securities claims, which could up how much money the agency could get should the cases go to trial. It was earlier this year a federal appeals court turned down arguments that FHFA’s claims were submitted too late.

This year has been one in which numerous financial firms have had to settle for their actions that resulted in massive losses for so many investors and others during the financial crisis. The SSEK Partners Group continues to work hard to help many of these investors get back their money. Over the years we have helped many institutional investors and high net worth individuals with their arbitration claims and securities lawsuits.

Deutsche Bank to Pay $1.93 Billion to Resolve FHFA Claims, Wall Street Journal, December 20, 2013

Deutsche Bank to Pay $1.9 Billion Over Troubled Mortgage Securities, The New York Times, December 20, 2013

More Blog Posts:
Deutsche Bank, Royal Bank of Scotland Settle & Others for More than $2.3B with European Union Over Interbank Offered Rates, Institutional Investor Securities Blog, December 24, 2013

Fannie Mae Sues UBS, Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, & Deutsche Bank, & Others for $800M Over Libor, Institutional Investor Securities Blog, December 14, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

December 24, 2013

Deutsche Bank, Royal Bank of Scotland Settle & Others for More than $2.3B with European Union Over Interbank Offered Rates

Deutsche Bank (DB) has announced that as part of a collective settlement, it will pay $992,329,000 to settle investigations involving interbank offered rates, including probes into the trading of Euro interest rate derivatives and interest rate derivatives for the Yen.
Also paying fines as part of the collective settlement are Royal Bank of Scotland Group Plc (RBS) which will pay $535,173,000 and Society General SA (SLE), which will pay $610,454,000, and three others. In total, the financial firms will pay a record $2.3 billion.

The fines are for manipulating the Euribor and the Yen London interbank offered rate. EU Competition Commissioner Joaquin Almunia said that regulators would continue to look into other cases linked to currency trading and Libor. Also related to these probes, Citigroup (C) has been fined $95,811,100, while JPMorgan (JPM) is paying $108M. Because of Citigroup’s cooperation into this matter, it avoided paying an additional $74.6 million. The two firms reportedly admitted that they were part of the Yen Libor financial derivatives cartel.

Almunia said that transcripts of Internet conversations exist documenting collusion between traders. According to Bloomberg News, which obtained excerpts of charts that the EU used in its investigation, one trader usually requested that a few banks set low or high fixings for a benchmark rate. (This month, Deutsche Bank barred multi-party chat rooms at its currency trading and fixed-income outfits.)

The setting of Yen Libor and European Libor were part of attempts by financial firms to make money in the financial derivatives connected to the benchmarks. Because UBS (UBS) and Barclays (BARC) notified the authorities about these activities first, they were not fined in the cartel matter, although regulators had fined them previously over Libor manipulation.

The SSEK Partners Group represents institutional investors and high net worth individuals with securities claims against financial institutions, broker-dealers, investment advisers, brokers, hedge funds, mutual funds, and others. Your initial case assessment with us is free.

Deutsche Bank reaches agreement with European Commission as part of a collective settlement on interbank offered rates, Deutsche Bank, December 4, 2013

Deutsche Bank to RBS Fined by EU for Rate Rigging, Bloomberg, December 4, 2013


More Blog Posts:
Fannie Mae Sues UBS, Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, & Deutsche Bank, & Others for $800M Over Libor, Institutional Investor Securities Blog, December 14, 2013

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013

December 14, 2013

Fannie Mae Sues UBS, Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, & Deutsche Bank, & Others for $800M Over Libor

Fannie Mae is suing nine banks over their alleged collusion in manipulating interest rates involving the London Interbank Offered Rate. The defendants are Bank of America (BAC), JPMorgan Chase (JPM), Credit Suisse, UBS (UBS), Deutsche Bank (DB), Citigroup (C), Royal Bank of Scotland, Barclays, & Rabobank. The US government controlled-mortgage company wants over $800M in damages.

Regulators here and in Europe have been looking into claims that a lot of banks manipulated Libor and other rate benchmarks to up their profits or seem more financially fit than they actually were. In its securities fraud lawsuit, Fannie Mae contends that the defendants made representations and promises regarding Libor’s legitimacy that were “false” and that this caused the mortgage company to suffer losses in mortgages, swaps, mortgage securities, and other transactions. Fannie May believes that its losses in interest-rate swaps alone were about $332 million.

UBS, Barclays, Rabobank, and Royal Bank of Scotland have already paid over $3.6 billion in fines to settle with regulators and the US Department of Justice to settle similar allegations. The banks admitted that they lowballed their Libor quotes during the 2008 economic crisis so they would come off as more creditworthy and healthier. Individual traders and brokers have also been charged.

Libor is used to establish interest rates on student loans, derivatives, mortgages, credit card, car loans, and other matters and underpins hundreds of trillions of dollars in transactions. The rates are determined through a process involving banks being polled on borrowing costs in different currencies over different timeframes. Responses are then averaged to determine the rates that become the benchmark for financial products.

Also a defendant in Fannie Mae’s securities case is the British Bankers’ Association, which oversees the process of Libor rate creation.

Earlier this year, government-backed Freddie Mac (FMCC) sued over a dozen large banks and the British Bankers’ Association also for allegedly manipulating interest rates and causing it to lose money on interest-rates swaps. Defendants named by the government-backed home loan mortgage corporation included Bank of America, JP Morgan Chase, Citigroup, Credit Suisse, and UBS.

Freddie Mac Sues Big Banks, The Wall Street Journal, March 19, 2013

Fannie Mae Sues Banks for $800 Million Over Libor Rigging, Bloomberg, November 1, 2013

More Blog Posts:
Sonoma County Files Securities Lawsuit Over Libor Banking Debacle, Institutional Investor Securities Blog, July 2, 2013

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

August 15, 2013

Bank of America, JPMorgan Chase Among Banks Sued by Danish Pension Funds in Credit Default Swaps Lawsuit

In U.S. District Court for the Northern District of Illinois, Danish pension funds (and their investment manager) Unipension Fondsmaeglerselskab, MP Pension-Pensionskassen for Magistre & Psykologer, Arkitekternes Pensionskasse, and Pensionskassen for Jordbrugsakademikere & Dyrlaeger are suing 12 banks accusing them of conspiring to take charge of access and pricing in the credit derivatives markets. They are claiming antitrust violations while contending that the defendants acted unreasonably to hold back competitors in the credit default swaps market.

The funds believe that the harm suffered by investors as a result was “tens of billions of dollars” worth. They want monetary damages and injunctive relief.

According to the Danish pension funds' credit default swaps case, the defendants inflated profits by taking control of intellectual property rights in the CDS market, blocking would-be exchanges’ entry, and limiting client access to credit-default-swaps prices, and

This securities case comes four years after the US Justice Department acknowledged that it had begun an investigation into possible anticompetitive activities involving credit derivatives clearing, and trading (a probe that is ongoing) and just a few months after the Sheet Metal Workers Local No. 33 Cleveland District Pension Plan sued the banks, Markit, and ISDA also for allegedly taking control of the CDS market, which it says resulted in customers being overcharged some $7 billion annually. The plaintiff contends that there may be billions of dollars in damages and it wants treble damages. Last month, it was the European Commission's turn to claim that 13 banks, ISDA, and Markit worked together to stop CDSs from being able to trade on open exchanges.

If you think you may have been the victim of securities fraud involving credit default swaps, you should speak with one of our experienced CDS fraud lawyers today.

There are over a dozen defendants in the Danish pension funds' CDS fraud case including:

J.P. Morgan Chase & Co. (JPM)
Citigroup Inc. (C)
Morgan Stanley (MS)
Bank of America Corp. (BAC)
• Credit Suisse Group AG (CS)
Deutsche Bank AG (DB)
• Royal Bank of Scotland Group PLC (RBS)
• Goldman Sachs Group Inc. (GS)
• Markit Group Ltd, a financial data provider
• International Swaps and Derivatives Association (ISDA)

Pensions Sue Banks Over Credit-Default Swaps, Wall Street Journal, July 12, 2013

Danish funds sue banks in U.S. for blocking CDS exchange-trading, Reuters/Yahoo, July 12, 2013

More Blog Posts:
US Will Likely Arrest Two Ex-JPMorgan Chase Employees Over Trading Losses Related to the London Whale Debacle, Institutional Investor Securities Blog, August 10, 2013

Morgan Stanley Reports a Possible $1.7B in Mortgage-Backed Securities Losses, Institutional Investor Securities Blog, August 16, 2011

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement, Stockbroker Fraud Blog, August 17, 2011

June 24, 2013

Cayman Islands LLC Must Replead CLO Securities Case Against Deutsche Bank

The U.S. District Court for the Southern District of New York says that Arco Capital Corp. a Cayman Islands LLC, has 20 days to replead its $37M collateralized loan obligation against Deutsche Bank AG (DB) that accuses the latter of alleged misconduct related to a 2006 CLO. According to Judge Robert Sweet, even though Arco Capital did an adequate job of alleging a domestic transaction within the Supreme Court's decision in Morrison v. National Australia Bank, its claims are time-barred, per the two-year post-discovery deadline and five-year statute of repose.

Deutsche Bank had offered investors the chance to obtain debt securities linked to portfolio of merging markets investments and derivative transactions it originated. CRAFT EM CLO, which is a Cayman Islands company created by the bank, effected the transaction and gained synthetic exposure via credit default transactions. For interest payment on the notes, investors consented to risk the principal due on them according to the reference portfolio. However, if a reference obligation, which had to satisfy certain eligibly requirements, defaulted in a way that the CDS agreements government, Deutsche Bank would receive payment that would directly lower the principal due on the notes when maturity was reached.

Arco maintains that the assets that experienced credit events did not meet the criteria. It noted that Deutsche Bank wasn’t supposed to use the transaction as a repository for lending assets that were distressed, toxic, or “poorly underwritten.”

Seeking to dismiss the claims, Deutsche Bank contended that Morrison barred the plaintiff’s 1934 Securities Exchange Act Section 10(b) claim. That ruling found that the section is only applicable to transactions in securities found on US exchanges or transactions that occur domestically. The bank argued that since Arco bought the notes offshore, the LLC is unable to allege federal securities fraud violation in relation to the transactions.

While the court was in agreement with Arco that the lawsuit and associate documents allow for the “plausible inference” that there was irrevocable liability in New York and that, for purposes of Morrison, investment in the Notes was a transaction that occurred domestically, it did say that the company could have found the facts pertaining to the violation within two years of that date that a plaintiff that was “reasonably diligent” would have sufficient data to file a case. Hence, the pleading was untimely.

Collateralized Loan Obligation
A CLO is a type of collateralized debt obligation. It is a securities backed by loans or receivables as we as a special purpose vehicle that has securitization payments as different tranches. CLOs are supposed to reduce lending costs for a business while lowering the lending risks for banks, which sell the loans to outside investors.

At SSEK, our CLO fraud lawyers represent institutional investors throughout the United States. Please contact our CDO law firm to request your free case assessment.

Morrison v. Australia (PDF)

Arco Capital Corporation Ltd. v. Deutshe Bank AG, Justia Docket

More Blog Posts:
Courts Nationwide Dismiss More Securities Actions: Madoff Trustee’s Case, Equinox Investor’s Class Lawsuit, K-Sea Transportation Litigation, & Shareholder Derivative Complaint is Thrown Out, Stockbroker Fraud Blog, June 21, 2013

Securities Lending Trial Against Wells Fargo & Co. is Underway, Institutional Investor Securities Blog, June 21, 2013

RMBS Lawsuit Against Deutsche Bank Can Proceed, Says District Court, Institutional Investor Securities Blog, April 4, 2013

April 4, 2013

RMBS Lawsuit Against Deutsche Bank Can Proceed, Says District Court

The U.S. District Court for the Southern District of New York is refusing to throw out the shareholder securities fraud lawsuit filed against Deutsche Bank (DB) and three individuals over their alleged role in marketing residential mortgage-backed securities and mortgage-backed securities before the economic crisis. The court found that the plaintiffs, led by Building Trades United Pension Fund, the Steward International Enhanced Index Fund, and the Steward Global Equity Income Fund, provided clear allegations that omissions and misstatements were made and there had been a scam with intent to defraud.

The RMBS lawsuit accuses Deutsche Bank of putting out misleading and false statements regarding its financial health prior to the financial crisis. The plaintiffs contend that the financial firm created and sold MBS it was aware were toxic, while overstating how well it could handle risk, and did not write down fast enough the securities that had dropped in value. Because of this, claim the shareholders, the investment bank’s stock dropped 87% in under 24 months.

U.S. District Judge Katherine Forrest said that the plaintiffs did an adequate job of alleging that even as Deutsche Bank talked in public about its low risk lending standards, senior employees at the firm were given information showing the opposite. She said that there are allegations of recklessness that are “plausible.” The district court also found that the complaint adequately alleged control person and antifraud violations involving defendants Chief Executive Officer Josef Ackermann, Chief Financial Officer Anthony Di Iorio, and Chief Risk Officer Hugo Banziger, who are accused of making material misstatements about the risks involved in investing in CDOS and RMBS while knowing they were less conservative than what investors might think. Claims against defendant ex-Supervisory Board Chairman Clemens Borsig, however, were thrown out due to the plaintiffs’ failure to allege that he made an actual misstatement.

The MBS case is looking for investors that purchased Deutsche stock between January 2007 and January 2009.

Deutsche Bank must face shareholder lawsuit: judge, Chicago Tribune, March 27, 2013

IBEW Local 90 Pension Fund v. Deutsche Bank AG (PDF)

More Blog Posts:
Deutsche Bank Settles Massachusetts CDO Case for $17.5 Million, Stockbroker Fraud Blog, April 1, 2013

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012

July 16, 2012

Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope

The London Inter-Bank Offer Rate (LIBOR) manipulation scandal involving Barclays Bank (BCS-P) has now opened up a global probe, as investigators from the United States, Europe, Canada, and Asia try to figure out exactly what happened. While Barclays may have the settled the allegations for $450 million with the UK’s Financial Services Authority, the US Department of Justice, and the Commodity Futures Trading Commission, now a number of other financial firms are under investigation including UBS AG (UBS), JPMorgan Chase (JPM), Deutsche Bank AG, Credit Suisse Group (CS), Citigroup Inc., Bank of Tokyo-Mitsubishi UFJ, HSBC Holdings PLC (HBC-PA), Lloyds Banking Group PLC (LYG), Rabobank Groep NV, Mizuho Financial Group Inc. (MFG), Societe Generale SA, RP Martin Holdings Ltd., Sumitomo Mitsui Banking Corp., and Royal Bank of Scotland PLC (RBS).

In the last few weeks, the accuracy of LIBOR, which is the average borrowing cost when banks in Britain loan money to each other, has come into question in the wake of allegations that Barclays and other big banks have been rigging it by submitting artificially low borrowing estimates. Considering that LIBOR is a benchmark interest rates that affects hundreds of trillions of dollars in financial contracts, including floating-rate mortgages, interest-rate swaps, and corporate loans globally, the fact that this type of financial fudging may be happening on a wide scale basis is disturbing.

“It’s my understanding the total financial paper effected by LIBOR is close to $500 trillion dollars. This is a half-quadrillion dollars if you are wondering about the next step up,” said Shepherd Smith Edwards and Kantas, LTD, LLP Founder and Institutional Investment Fraud Attorney William Shepherd.

Barclays contends that its manipulation of borrowing estimates could not alone have dramatically influenced the final labor rate. The bank claims that it submitted low borrowing costs that were artificial because it suspected that this is what other banks were doing and it didn’t want to look like it was in financial trouble by comparison.

“In the US, these allegations could fall under the Sherman Anti-trust and/or the Clayton Unfair Trade Practices Acts, said Securities Lawyer Shepherd. “The recovery possible under such legislation could reach triple damages, plus legal fees and costs.”

A slew of securities lawsuits, including class actions and regulator complaints, against some of these banks under investigation, are likely. CNN reports that already, attorneys general in Massachusetts, Florida, New York, and Connecticut are investigating the LIBOR rate-setting scandal. There may be a variety of plaintiff types, including municipal governments and investment firms.

“Institutions are usually the subject of such actions, which are also federal crime statutes, but individuals can also be held liable,” said Stockbroker Fraud Attorney Shepherd. “The allegations cover more than just price-fixing or predatory pricing and involve multiple acts of price manipulation among institutions (legally an “enterprise”), such that racketeering (RICO) laws could also apply.”

Banks belonging to the LIBOR panels will likely become defendants of criminal complaints, regulator complaints, and huge class actions. For now, they in turn, have been blaming the central banks and regulators.

States weighing Libor scandal suit, CNN, July 16, 2012

Who Else Is Under Investigation for Libor Manipulation?, The Wall Street Journal, July 9, 2012

The Worst Banking Scandal Yet?, Bloomberg, July 12, 2012

More Blog Posts:
$1.2 Billion of MF Global Inc.’s Clients Money Still Missing, Stockbroker Fraud Blog, December 10, 2011

Ex-Goldman Sachs Director Rajat Gupta Pleads Not Guilty to Insider Trading Charges, Stockbroker Fraud Blog, October 26, 2011

Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012

April 21, 2011

Anschutz Corp.’s Securities Fraud Lawsuit Against Deutsche Bank and Credit Rating Agencies Over Their Alleged Mishandling of Auction-Rate Securities Can Proceed, Says District Court

The U.S. District Court for the Northern District of California says that the auction securities lawsuit filed by Anschutz Corp. against Deutsche Bank Securities Inc. and a number of credit rating agencies can proceed. Anschutz bought DBSI ARS between July 206 and August 2007 through Credit Suisse. The plaintiff is seeking damages and other relief related to the ARS it bought that was underwritten by DBSI, which also served as its broker-dealer.

Anschutz contends that it bought the securities believing that they were liquid because of the DBSI’s deceptive and manipulative activities. The plaintiff claims that by serving as market maker, DBSI ensured that the auctions would be successful as long as it kept supporting the bids. To make the ARS appear liquid, DBSI also allegedly “manipulated the market” by putting in support bids for every auction that the securities were involved in as well as for other ARS for which it was the lead or sole broker-dealer. When DBSI stopped making bids in July 2007, the auctions failed the following month. Anschutz contends that not only did DBSI know this would happen, but also, by acting as the only broker-dealer that could take part in certain securities’ auctions, the financial firm made it seem as if there was enough third party demand and was able to lower the auctions’ interest rates.

Regarding its claims against rating agencies, Anschutz says that the latter relaxed their rating system to get DBSI’s business. The plaintiff contends that the AAA ratings that the agencies issued were misleading and false but knew that was the way to get paid. Anschutz also says that the agencies should have known or knew that DBSI was creating an artificial market for the ARS.

Related Web Resources:
Deutsche Bank, Rating Agencies Fail To Topple Investor Suit Over ARS Activities, BNA Broker/Dealer Compliance Report, March 30, 2011

Anschutz Corp. v. Merrill Lynch & Co. Inc.

More Blog Posts:
Akamai Technologies Inc’s ARS Lawsuit Against Deutsche Bank Can Proceed, Institutional Investor Securities Blog, March 4, 2011

Credit Suisse Broker Previously Convicted for Selling High Risk ARS is Barred from Future Securities Law Violations, Institutional Investor Securities Blog, February 12, 2011

NASAA Says Investors with Frozen Auction-Rate Securities Should Ask Investment Firms About Buyback Opportunities, Stockbroker Fraud Blog, November 19, 2008

Continue reading "Anschutz Corp.’s Securities Fraud Lawsuit Against Deutsche Bank and Credit Rating Agencies Over Their Alleged Mishandling of Auction-Rate Securities Can Proceed, Says District Court" »

March 4, 2011

Akamai Technologies Inc’s ARS Lawsuit Against Deutsche Bank Can Proceed

The U.S. District Court for the District of Massachusetts says that, under the 1934 Securities Exchange Act and the Massachusetts’ Uniform Securities Act, Akamai Technologies Inc.’s (AKAM) auction-rate securities lawsuit that seeks to hold Deutsche Bank AG liable for $200 million in losses can proceed. The judge ruled that the Internet content delivery firm had properly pleaded a material misrepresentation or omission in violation of Section 10(b) of the '34 Securities Exchange Act, which is necessary for a control person claim under Section 20(a). The court also held that Akamai clearly pleaded Deutsche Bank's control over Deutsche Bank Securities Inc., the subsidiary that allegedly advised the company to buy the toxic ARS.

Per the court, DBS was the broker and investment adviser for Akamai Securities Corp. and Akamai Technologies Inc. Akamai told the investment adviser that it wanted to put money in securities that were liquid and safe so it could access the funds when needed. DBS told Akamai that ARS were safe, liquid, and never failed even though the financial firm allegedly knew that they had done so before and, in fact, posed a higher level of risk than what it led Akamai to believe. Even in August 2007, when Deutsche Bank knew that the demand for ARS was going down and the risk of ARS auctions failing was rising, the investment adviser still allegedly did not notify Akamai that the market was changing.

When the ARS market did fall in 2008, Akamai was left with over $200 million in illiquid securities. Its securities fraud lawsuit also claims that even as DBS continued to claim that the securities were liquid and safe, resulting in Akamai increasing its ARS investments, the investment bank was decreasing its own exposure to the market.

Related Web Resources:
Deutsche Bank Loses Bid to Dismiss Control Person Claims by ARS Investor, BNA

Frozen in time,, February 16, 2010

Akamai Technologies, Inc. and Akamai Securities Corp. v. Deutsche Bank AG (PDF)

Massachusetts’ Uniform Securities Act

More Blog Posts:
Credit Suisse Broker Previously Convicted for Selling High Risk ARS is Barred from Future Securities Law Violations, Institutional Investors Securities Blog, February 12, 2011

Merrill Lynch Doesn’t Have to Arbitrate ARS Claims by LSED, Says Appeals Court, Institutional Investors Securities Blog, December 22, 2010

Citigroup Global Markets to Pay Back $95.5M Over ARS Sold to LandAmerica Exchange Fund, Institutional Investors Securities Blog, November 11, 2010

Continue reading "Akamai Technologies Inc’s ARS Lawsuit Against Deutsche Bank Can Proceed" »

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