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After Favorable LIBOR Ruling from the Second Circuit, Investors Now Allege Anticompetitive SIBOR Manipulation

On July 5, 2016, investors filed a federal class action in the Southern District of New York alleging defendant banks had manipulated the Singapore Interbank Offered Rate (SIBOR) “and/or” Singapore Swap Offer Rate (SOR) market, forcing investors to pay artificial prices for financial derivative transactions based on these benchmarks. This lawsuit follows on the heels of the Second Circuit’s decision in In re: LIBOR-Based Financial Instruments Antitrust Litigation, which allowed the case to proceed.  That case involved allegations that a similar group of defendant banks, members of the panel that set LIBOR, understated their borrowing costs and suppressed LIBOR, allowing the defendants to pay lower interest rates on financial instruments sold to investors.


Initially, the lead complaint in the LIBOR class action was dismissed in its entirety for failure to plead antitrust injury.  The District Court reasoned that because the LIBOR-setting process was collaborative rather than competitive, any manipulation of LIBOR did not cause anticompetitive harm.

When the case reached the Second Circuit, however, the District Court’s decision was vacated, finding that the complaint had successfully alleged an antitrust violation because the banks had “circumvented the LIBOR-setting rules,” turning that joint process into collusion, and thus violating the antitrust laws.  Moreover, the plaintiffs had alleged sufficient antitrust injury because, due to the conspiracy, the consumers had paid “prices that no longer reflect[ed] ordinary market conditions,” therefore suffering injury of the type the antitrust laws were intended to prevent. The court remanded the case to determine whether the plaintiffs were efficient enforcers of the antitrust laws.  We wrote about the Second Circuit’s decision here.

SIBOR Complaint

Given the LIBOR plaintiffs’ victory in the Second Circuit, new plaintiffs now assert related Sherman Act violations related to the Singapore Interbank Offered Rate (SIBOR) “and/or” Singapore Swap Offer Rate (SOR) markets.  As in the LIBOR class action, plaintiffs allege that the defendant banks “made false daily SIBOR submissions to alter the fixing, and thereby affect the prices of SIBOR-based derivatives for their own financial benefit to the detriment of Plaintiffs and the Class.”

Mindful of the Second Circuit’s decision in the LIBOR action, plaintiffs note: “Although SIBOR was jointly set, Defendants remained horizontal competitors in the sale of SIBOR-based derivatives.”  In particular, plaintiffs allege that the defendants turned “a joint process into an anticompetitive, collusive enterprise to increase Defendants’ profits at the expense of Plaintiffs and the Class.”

Specifically, plaintiffs claim that defendants’ anticompetitive conduct had already been uncovered by multiple government authorities, including the Monetary Authority of Singapore (MAS), the U.S. Commodity Futures Trading Commission, and the U.K. Financial Services Authority.  These entities’ investigations led to several settlements, collectively amounting to over $10 billion in penalties.

Plaintiffs allege that in one investigation, MAS “uncovered rare ‘smoking gun’ evidence of anticompetitive conduct and found that traders from ‘several banks communicated with each other over electronic messaging about what rates they were going to submit . . . aiming to benefit their trading books.’”

According to plaintiffs, these “government settlements, factual findings, and admissions, demonstrate that Defendants stopped competing during the Class Period and operated a secret cartel to manipulate SIBOR and SOR by, inter alia, submitting artificial interest rate quotes and engaging in manipulative trades, to maximize their own profits in SIBOR- and SOR-based derivatives at the expense of Plaintiffs and the Class.”  Plaintiffs allege that this conduct constitutes a per se conspiracy in violation of the antitrust laws, and that as a result, “[plaintiffs] paid more for or received less on its SIBOR-based swap transactions with Defendants.”

Plaintiffs bring claims under the Sherman Act and the Racketeer Influenced and Corrupt Organizations Act, as well as for breach of the implied covenant of good faith and fair dealing and unjust enrichment.  They seek an injunction, treble damages, disgorgement, and costs and attorneys’ fees.

We will continue to monitor this case and report significant developments as it proceeds.