A new attack on the predations of the financial industry was announced by Bloomberg on Wednesday morning with the revelation of a lawsuit alleging that both HSBC Holdings Plc (HSBA) and Goldman Sachs Group Inc. (GS) had jointly engaged in price manipulation of the precious metals market for at least eight years.
Attorneys for the Plaintiffs, Modern Settings LLC, and a New York jeweler stated that this was the first lawsuit of its kind filed in the United States. Cointelegraph has been unable to contact attorneys on either side of this case for comments, possibly due to the holidays.
The civil complaint alleges that the defendants engaged in regular conferences that planned out their fixing schemes, including conference calls twice a day. Currently the suit is a single plaintiff action but Modern Settings has reauested the judge’s permission to represent other interests.
HSBC and Goldman Sachs are not the only targets of the class action suit however. Also in the cross hairs are Standard Bank Group Ltd. and a metals unit of BASF SE (BAS), the world’s largest chemical company. The entire group is accused of using inside information regarding customer purchases to profit from and possibly influence price movements for both platinum and palladium according to the complaint filed in Federal Court in the Southern District of Manhattan.
The suit claimed that all four companies:
“[…]were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction.”
The question, which will be settled in court, is whether these companies used this information to gain advantage over traders who were not privy to this information. While this is the first lawsuit concerning the trading of platinum and palladium, there are similar suits ranging from fixing the gold market to price fixing in interbank loan rates and currencies that involve numerous other New York banks.
Thus, regulators are tightening their focus in several nations from the US to the European Union. The United States Department of Justice has been under heavy criticism after its “too big to fail” policy that protected banks, financial institutions and their officers from prosecution.
Some businesses are changing traditional practices to help prevent activities such as price fixing and manipulation. Intercontinental Exchange Inc. (ICE) for instance is making massive changes in its usual gold fixing paradigm and plans to institute the same changes for platinum and palladium on December 1, 2014. The importance of these changes cannot be overstated because these metals are used for more than simple jewelry.
Palladium, for instance, is used in catalytic converters and car manufacturers are increasing their use of platinum by 7.9% over the next year. The auto industry uses millions of ounces of platinum each year and artificial price increases also drive up the prices of automobiles, directly affecting millions of consumers.
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