Goldman Sachs and HSBC have been named among a group of banks being sued in the US for allegedly manipulating the benchmark prices of platinum and palladium.
South Africa’s Standard Bank and Germany’s BASF have also been accused of manipulating the precious metals’ prices by Modern Settings, a jeweller that buys both the physical metals and derivatives set on their prices.
The jeweller claimed the banks “were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction” of prices.
“This unlawful behaviour allowed defendants to reap substantial profits, while non-insiders, which include plaintiffs and members of the class, were injured,” lawyers acting for the company added.
Banks across the globe have already paid billions of dollars in fines for manipulating Libor interest rates and foreign exchange rates.
A replacement for the twice-daily “fixes” of benchmark platinum and palladium prices will start next month under the auspices of the London Metal Exchange. But the lawsuit said this reform had come too late.
The first of the precious metal “dominos” to fall was silver. Its pricing procedures were shaken up in August, with an alternative provided by the Chicago Mercantile Exchange.
Gold was then taken over by the Intercontinental Exchange Benchmark Administration, which replaced a fixing process that was for years held at Rothschild’s, the merchant bank, with small union flags raised or lowered depending on whether the participants were ready to “fix”.
It was briefly replaced by a teleconference system.
In addition to the platinum and palladium legal claims, lawsuits have been filed in New York accusing banks of rigging gold prices, and authorities around the world are closely scrutinising it for any signs of wrongdoing.
The City of London’s benchmarks went unregulated for many years, but the Libor scandal brought new scrutiny to a host of lightly scrutinised “dark corners” of Britain’s financial markets.
Neither Goldman nor HSBC were prepared to comment on yesterday’s news.
Separately, HSBC is facing an inquiry into allegations that an employee leaked confidential client information to a major hedge fund, according to reports. The leak is alleged to have taken place in March 2010, when HSBC was advising the life insurer Prudential on its failed bid for the Asian insurer AIA.Reuse content