[heading]These Banks Are Getting Sued For Manipulating This 6,000 Year Old Form Of Money[/heading]
The New York Times published a piece on May 5 entitled “Banks Sued On Claims Of Fixing Price Of Gold,” which goes into detail about a bunch of gold price suppression lawsuits in New York. The article goes over the 40-minute hearing in which lawyers for over twenty plaintiffs met in a Federal District Court in Manhattan so as to coordinate their lawsuits against the five banks which steer the London Gold Fix.
As The New York Times wrote, “a handful of bankers began to meet in the wood-paneled offices of N. M. Rothschild & Sons in London. The purpose of the fix is to set a benchmark price for gold, which is subsequently used by dealers, central banks and mining firms to buy and sell the precious metal and its various derivatives.”
Who are these banks?
Barclay’s was ultimately fined $43.8 million towards the end of May due to compliance issues. A trader at the bank was able to manipulate the setting of gold prices. According to the Financial Conduct Authority in the United Kingdom, Barclay’s compliance failures allowed the manipulation of gold between 2004 and 2013.
Although Deutsche Bank left the gold fix May 13, it will remain a defendant in the consolidated cases. In the month before leaving the fix, regulators in Germany were keeping an increasingly close eye on Deutsche Bank (along with other precious metal fixers) as manipulation concerns gravitated from the LIBOR scandal to other markets. By that point, Deutsche Bank was marketing its seat to other LBMA members but nobody would buy. After being unable to find a buyer, Deutsche Bank resigned, giving two weeks notice. Shortly thereafter the silver fix announced its end.
Bank Of Nova Scotia
ScotiaBank claims to be Canada’s only bullion bank, but this is mostly marketing. The bank claims to be one of the largest dealers in precious metals, but can that claim be substantiated? Eric King, when he visited Scotia Bank’s vaults in Toronto, was surprised by how little metal was there. Perhaps much is held elsewhere in vaults, but surely there are bigger players in the precious metals space.
Societe Generale SA
Societe General has suffered from the same sort of lack of compliance that brought the million dollar lawsuit against Barclay’s. Societe Generale has lost billions of dollars apparently due to rogue traders. On March 21, 2008, Société Générale filed suit in Istanbul Commercial Court against Goldas, a Turkish Jewelry firm, claiming the company had not paid for 15 tonnes(15,000 kg) of gold it had received through a consignment agreement. Goldaş stated that the consignment agreement was only for 3,250 kg of gold with a value of US$94 million. In June 2008, the court found Goldaş not guilty.
After bullion trader Andrew Maguire told US regulators that fraud had been committed by JP Morgan and HSBC, he was allegedly injured in a hit-and-run accident the day after he was identified as the source of the allegations. On March 29, 2010 he was interviewed and went public the following month with assertions that JP Morgan Chase and HSBC were manipulating gold and silver. HSBC declined to comment.
In 2012, HSBC had to pay a $1.9 billion fine to US regulators for laundering money for drug cartels. By helping the Sinaloa cartel and a Colombian cartel launder $888 million in money. Reuters called HSBC “the place to launder money.”
This was a cursory look at the banks who have been heavily involved in the precious metals markets, either trading or foxing the price directly. The banks ought to come as no surprise, as many have been implicated in numerous scandals and have been found guilty even of manipulating marks, including LIBOR.
Gold, silver and bitcoin offer opportunities for individual investors to diversify away from the traditional banking system. While holding equities, bonds, stocks and so on and yield considerable gains, insuring those holdings via assets like precious metals and decentralized digital currencies is a new, untapped horizon.