Deutsche Bank has paid $38 million dollars to settle a lawsuit alleging that they conspired with other banks to ‘fix’ the silver price. What allegedly occurred with silver price fixing and what impact this could this have on the silver market?
Like other publicly traded assets, the silver market fluctuates in price. If good news hits the market the price of silver increases, if bad news hits the market the price decreases. This lawsuit alleges that, since 1999, banks have conspired to ‘fix’ the market. This means they tried to control the prices, rigging it so they could exploit the market’s movements. The banks allegedly involved in the price fix included Deutsche Bank, HSBC Holdings, UBS and the Bank of Nova Scotia. According to the lawsuit, each morning the banks met for a meeting called the “Silver Fix” where they discussed manipulating the price. Genuine investors started the lawsuit, claiming that the market manipulation by the banks had cost them their investments.
United States District Court Judge Valarie Caproni ruled that the investors had shown that the banks had conspired to rig the markets. This market manipulation violated Anti-Trust laws by trying to depress the silver price. The lawsuit settlement offer from Deutsche Bank for $38 million dollars is currently awaiting court approval. It is hoped that this settlement will be able to convince the other banks to settle. However, if they don’t, the settlement means Deutsche will cooperate to help prosecute any of the banks refusing a settlement. The judge released UBS from the claim, saying that while they benefited from the fix there wasn’t any evidence that they participated in manipulating the markets. The investors, however, have indicated that they will amend their lawsuit to try and get UBS to pay for their part in the fix. So far, none of the banks have commented.
Understandably, some investors have been left shaken by the allegations of price fixing by the banks. They feel that because this is a relatively small market it would be easier for banks to control. If the allegations of this lawsuit are true it would prove that these theories are correct. This case could prove that the silver market has been mismanaged to allow banks to rig the market. If this lawsuit can prove its allegations, then the silver market could grow smaller, with investors turn to other instruments.
Deustsche Bank has agreed to settle for $38 million dollars while also agreeing to help prosecutors with any banks who refused to settle. If proven in court, this lawsuit could have huge implications on the silver market. At the very least, this lawsuit can shed some light on the unethical practices that have occurred in the market and allow lawmakers to change to system to prevent future manipulations.