Case 1:14-md-02548-VEC Document 266 Filed 06/16/17 Page 1 of 189 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE: Case No. 14-MD-2548 (VEC) COMMODITY EXCHANGE, INC., GOLD 14-MC-2548 (VEC) FUTURES AND OPTIONS TRADING LITIGATION THIRD CONSOLIDATED AMENDED CLASS ACTION This Document Relates To All Actions COMPLAINT JURY TRIAL DEMANDED Case 1:14-md-02548-VEC Document 266 Filed 06/16/17 Page 2 of 189 TABLE OF CONTENTS NATURE OF THE ACTION ..........................................................................................................1 JURISDICTION AND VENUE ....................................................................................................12 THE PARTIES...............................................................................................................................13 A. Plaintiffs .............................................................................................................................13 B. Defendants .........................................................................................................................23 FACTUAL ALLEGATIONS ........................................................................................................29 I. BACKGROUND ON THE GOLD MARKET .....................................................................29 A. The London Gold Fixing ...................................................................................................29 B. The LBMA .........................................................................................................................32 C. The London Bullion Market ..............................................................................................33 D. The Many Outlets for Gold Investments ...........................................................................35 E. The Fixing Impacts the Prices of Both Physical and Derivative Gold Investments, and the Share Prices of Gold ETFs ....................................................................................38 II. MULTIPLE ECONOMIC ANALYSES REVEAL ARTIFICIAL DOWNWARD SPIKES AROUND THE TIME OF THE PM FIXING .......................................................43 A. To a Statistically Significant Degree, Prices Around the PM Fixing Trended Lower than Previously Prevailing Prices ...........................................................................44 B. To a Statistically Certain Degree, Price Movements Around the PM Fixing are Contrary To Price Trend on a Given Day ..........................................................................49 C. To a Statistically Significant Degree, the PM Fix Price Fell Into the Extreme Outliers of Prices for that Trading Day ..............................................................................52 D. To a Statistically Certain Degree, a Comparison of Minute-by-Minute Prices Reveal a Pattern of Price Spikes Around the Fixing..........................................................53 E. To a Statistically Certain Degree, the PM Fixing Downward Spikes Stand Out as Against Movements at Any Other Time of Day – Even the AM Fixing ...........................58 F. The Downward Spikes Can Be Seen in the Daily Data as Well ........................................65 i Case 1:14-md-02548-VEC Document 266 Filed 06/16/17 Page 3 of 189 III. PLAINTIFFS HAVE IDENTIFIED SPECIFIC DAYS ON WHICH THEY ALLEGE, BASED ON THESE STATISTICAL STUDIES, THAT MANIPULATION OCCURRED .........................................................................................................................67 IV. THERE IS NO INNOCENT EXPLANATION FOR THE ABNORMALITIES SEEN IN THE PRICING DATA SURROUNDING THE PM FIXING ........................................68 A. None of the Proposed Alternative Explanations are Persuasive ........................................69 1. The asymmetrical movements cannot be explained by general market trends ..... 69 2. The asymmetrical movements cannot be explained by the fact the Fixing was releasing new information into the market ........................................................... 69 3. The asymmetrical movements cannot be explained by a purported increase in market liquidity ..................................................................................................... 72 B. Other External Market Forces Cannot Account for the Anomalous Price Movements Observed Around the Fixing ..........................................................................81 V. THE PRICE MOVEMENTS AROUND THE PM FIXING WERE THE RESULT OF DEFENDANTS’ MANIPULATIONS .................................................................................84 A. The Defendants Banks Were Heavily Motivated to Exercise Joint Control Over the Prices for Gold .............................................................................................................87 1. The Defendant Banks were heavily invested in gold............................................ 87 2. Defendants were particularly motivated by their huge “short” COMEX futures positions ................................................................................................................ 90 3. Even “balanced” – or “hedged” – portfolios present the opportunity to profit from daily spikes – particularly if the portfolio is “short” in futures, specifically ........ 95 4. The movement of the Fix price is highly correlated with the Defendants’ COMEX positions ................................................................................................................ 98 5. There are numerous other ways to profit from foreknowledge about an upcoming price spike ............................................................................................................. 99 B. The “Tools of the (Manipulation) Trade” Are Well Known to Defendants ....................101 C. Further Analysis of the Available Pricing Data Confirms it Was Defendants, Acting Jointly, Behind the Pricing Anomalies ................................................................109 D. Defendants’ Manipulative Activities Impacted the Purported “Auction” Process ..........112 E. Numerous Plus Factors Are Probative of Collusion in Connection with the London Gold Fixing .........................................................................................................117 ii Case 1:14-md-02548-VEC Document 266 Filed 06/16/17 Page 4 of 189 VI. ONGOING GOVERNMENT INVESTIGATIONS CORROBORATE PLAINTIFFS’ ALLEGATIONS .................................................................................................................121 A. Multiple Investigations Are Underway Worldwide .........................................................121 B. Barclays Has Been Fined for Manipulating the Fixing, Using the Very Methods Alleged Here ....................................................................................................................125 C. FINMA Found Similar Problems at UBS ........................................................................129 D. Other Relevant Findings ..................................................................................................131 VII. MULTIPLE ECONOMIC ANALYSES CONFIRM THAT THE CONSPIRACY WAS ONGOING IN 2004 AND 2005 ...............................................................................134 A. Nearly All Of The Economic Analyses Discussed Above Apply With At Least Equal Force To 2004 And 2005 .......................................................................................134 B. Supplemental Analyses Confirm That The Studies Which Originally Focused On 2007 To 2013 Also Apply To 2004 And 2005 ................................................................143 C. Additional Analyses Further Confirm That The Conspiracy Extended To 2004 And 2005 ..........................................................................................................................150 VIII. UBS ACTIVELY PARTICIPATED IN THE CONSPIRACY TO MANIPULATE GOLD PRICES ...................................................................................................................154 A. Multiple Economic Analyses Show That UBS Was An Active Participant In Leading the Market Down Alongside the Panel Banks ...................................................154 B. Cooperation Materials From Fixing Bank Defendant Deutsche Bank Further Confirm That UBS Was An Active Participant In The Conspiracy ................................158 IX. DEFENDANTS’ CONDUCT RESTRAINED TRADE, DECREASED COMPETITION, AND ARTIFICIALLY LOWERED PRICES, THEREBY INJURING PLAINTIFFS ...................................................................................................165 A. Prices for Gold Investments – Including The Spot Market as Governed by the Fixing – are Inextricably Linked ......................................................................................165 B. Defendants’ Artificial Lowering of the Price of Gold, Including the PM Fix Price, Directly Impacted the Market for Gold Investments .......................................................166 C. Plaintiffs, as Sellers in the Market for Gold Investments, Were Injured by Transacting at Lowered Prices Created by Defendants’ Collusive Conduct ...................169 D. Defendants’ Manipulative Conduct Caused Sustained Price Suppression of Gold Prices ................................................................................................................................169 iii Case 1:14-md-02548-VEC Document 266 Filed 06/16/17 Page 5 of 189 X. EQUITABLE TOLLING