Case 1:21-cv-00606 Document 1 Filed 06/30/21 Page 1 of 133 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO NEW MEXICO STATE INVESTMENT COUNCIL, Plaintiff, v. BANK OF AMERICA CORPORATION; BANK OF AMERICA, N.A.; BOFA SECURITIES, INC.; BARCLAYS PLC; BARCLAYS BANK PLC; BARCLAYS CAPITAL INC.; BNP PARIBAS S.A.; BNP PARIBAS SECURITIES CORP.; CITIGROUP, INC.; CITIBANK N.A.; CITIGROUP GLOBAL MARKETS INC.; CITIGROUP GLOBAL MARKETS LIMITED; CREDIT SUISSE GROUP AG; CREDIT SUISSE AG; CREDIT SUISSE SECURITIES (USA) LLC; CLASS ACTION COMPLAINT CREDIT SUISSE CAPITAL LLC; CREDIT SUISSE INTERNATIONAL; DEUTSCHE JURY TRIAL DEMANDED BANK AG; DEUTSCHE BANK SECURITIES INC.; GOLDMAN SACHS GROUP, INC.; GOLDMAN SACHS & CO. LLC; GOLDMAN SACHS INTERNATIONAL; J.P. MORGAN CHASE & CO.; J.P. MORGAN CHASE BANK, N.A.; J.P. MORGAN SECURITIES LLC; MORGAN STANLEY; MORGAN STANLEY & CO., LLC; MORGAN STANLEY & CO. INTERNATIONAL PLC; MORGAN STANLEY CAPITAL SERVICES, LLC; NATWEST GROUP PLC; NATWEST MARKETS PLC; NATWEST MARKETS SECURITIES, INC.; THE INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.; CREDITEX GROUP INC; IHS MARKIT, LTD.; and JANE DOES 1-100, Defendants. Case 1:21-cv-00606 Document 1 Filed 06/30/21 Page 2 of 133 TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................. 1 II. JURISDICTION & VENUE ................................................................................................. 13 III. THE PARTIES...................................................................................................................... 14 A. Plaintiff ............................................................................................................................. 14 B. Defendants ........................................................................................................................ 16 1. The Dealer Defendants ............................................................................................... 16 a) Bank of America / Merrill Lynch Defendants .......................................................... 16 b) Barclays Defendants ................................................................................................. 19 c) BNP Paribas Defendants ........................................................................................... 20 d) Citi Defendants ......................................................................................................... 22 e) Credit Suisse Defendants .......................................................................................... 25 f) Deutsche Bank Defendants ....................................................................................... 28 g) Goldman Sachs Defendants ...................................................................................... 29 h) JPMorgan Defendants ............................................................................................... 31 i) Morgan Stanley Defendants ...................................................................................... 34 j) RBS Defendants ........................................................................................................ 36 2. The Non-Dealer Defendants ....................................................................................... 37 a) ISDA ......................................................................................................................... 37 b) Creditex ..................................................................................................................... 38 c) Markit ........................................................................................................................ 39 3. Jane Does / Unknown Defendants .............................................................................. 40 IV. FACTUAL ALLEGATIONS ............................................................................................... 41 A. Background On the CDS Settlement Process ................................................................... 41 i Case 1:21-cv-00606 Document 1 Filed 06/30/21 Page 3 of 133 1. The CDS Market ......................................................................................................... 41 2. Settlement Of CDS Contracts ..................................................................................... 43 3. The Dealers’ Role In The CDS Market ...................................................................... 44 4. The Defendants Introduce The CDS Auction Process To The Market ...................... 45 5. The ISDA CDS Credit Event Process And The ISDA Credit Default Swap Auction Protocol ............................................................................................... 47 a) The Determinations Committee ................................................................................ 48 b) The CDS Auctions .................................................................................................... 49 6. CDS Indices ................................................................................................................ 51 a) CDS Indices Generally ............................................................................................. 51 b) CDS Auction Prices Have A Direct, Necessary Impact On Single-Name And Index CDS ............................................................................. 58 B. The Dealers Conspire To Manipulate The CDS Final Auction Price ............................... 59 1. The Dealers Agree To Exclude And Constrain Non-Dealer Rival Participation In The CDS Auctions ............................................................................ 61 2. The Dealers Coordinate Their Auction Submissions And Exploit Inside-Information Advantages To Manipulate The CDS Final Auction Price ......... 67 a) Econometric Analysis Shows That The Dealers Secretly Coordinate Their Auction Submissions, Using The Information They Share With Each Other To Engage In Benchmark Manipulation ................................................ 67 b) The Dealers Are Coordinating Their Initial Market Submissions ............................ 70 c) The Dealers’ Interdealer Pricing Coordination Is Carried Through Into The Limit Order Stage Of The Auction ............................................................ 76 d) The Dealers’ Collusive Price Manipulation Has A Substantial Effect On The Initial Market Midpoint and the Final Auction Price .................................. 82 3. The Dealers Share Their Pricing With Each Other Through Bloomberg ................... 89 4. The Dealers Learn Confidential Client Information In The Auction And Then Front-Run Their Clients’ Physical Settlement Requests And ii Case 1:21-cv-00606 Document 1 Filed 06/30/21 Page 4 of 133 Limit Orders In The Auction, Resulting In A Supra-Competitive Final Auction Price ..................................................................................................... 90 5. The Dealers Share Material, Non-Public Information With Each Other During Determinations Committee Meetings............................................................. 92 6. The Dealers Routinely, Informally, And Privately Communicate With One Another ...................................................................................................... 93 C. The Antitrust And Regulatory Red Flags About The Auction Process ............................ 94 D. Plus Factors Indicative Of The Dealers’ Conspiracy To Manipulate The CDS Final Auction Price ........................................................................................... 96 E. The Dealers’ Conduct Is A Per Se Violation Of The Antitrust Laws ............................ 103 1. It Is A Per Se Violation Of The Antitrust Laws For The Dealers To Collude To Manipulate A Benchmark Price .......................................................................... 103 2. Even Under A Quick Look Or Rule Of Reason Analysis, The Defendants’ Conduct Violates The Antitrust Laws ...................................................................... 105 F. The Plaintiff Was Injured As A Result Of Defendants’ Manipulation ........................... 111 G. Equitable Tolling Due To Defendants’ Concealment ..................................................... 114 1. Defendants Actively And Effectively Concealed Their Collusion And Misconduct From Plaintiff And The Class And Committed Acts In Furtherance Of Their Concealment ............................................................. 114 a) The Dealers Have Propagated A Variety Of Pretextual Justifications That Mask Their Conspiracy To Manipulate The Final Auction Price .................. 115 b) Plaintiff Was Able To Uncover The Dealers’ Conspiracy Only Through A Sustained, Extensive, And Expensive Investigation That Similarly-Situated Entities Do Not Have The Resources To Undertake .......................................................................................................... 118 c) The Dealers Have Operated Without Serious Government Oversight And Have Not Been Caught ................................................................................... 119 2. Defendants’ Conduct Constitutes A Continuing Violation Of The Antitrust Laws .............................................................................................. 119 V. CLASS ACTION ALLEGATIONS ................................................................................... 120 iii Case 1:21-cv-00606 Document 1 Filed 06/30/21 Page