Case 1:13-cv-02811-PKC Document 174 Filed 08/13/15 Page 1 of 214 UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK STEPHEN SULLIVAN, WHITE OAK FUND LP, CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM, SONTERRA CAPITAL MASTER FUND, LTD., FRONTPOINT PARTNERS TRADING Docket No. 13-cv-02811 (PKC) FUND, L.P., AND FRONTPOINT AUSTRALIAN OPPORTUNITIES TRUST on behalf of themselves ECF Case and all others similarly situated, Plaintiffs, FOURTH AMENDED CLASS - against - ACTION COMPLAINT BARCLAYS PLC, BARCLAYS BANK PLC, BARCLAYS CAPITAL INC., BNP PARIBAS S.A., JURY TRIAL DEMANDED CITIGROUP, INC., CITIBANK, N.A., COÖPERATIEVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A., CRÉDIT AGRICOLE S.A., CRÉDIT AGRICOLE CIB, DEUTSCHE BANK AG, DB GROUP SERVICES UK LIMITED, HSBC HOLDINGS PLC, HSBC BANK PLC, ICAP PLC, ICAP EUROPE LIMITED, J.P. MORGAN CHASE & CO., JPMORGAN CHASE BANK, N.A., THE ROYAL BANK OF SCOTLAND PLC, SOCIÉTÉ GÉNÉRALE SA, UBS AG AND JOHN DOE NOS. 1-50, Defendants. Case 1:13-cv-02811-PKC Document 174 Filed 08/13/15 Page 2 of 214 TABLE OF CONTENTS SUMMARY OF ALLEGATIONS ................................................................................................. 1 JURISDICTION AND VENUE ................................................................................................... 12 PERSONAL JURISDICTION ...................................................................................................... 14 PARTIES ...................................................................................................................................... 23 A. The Barclays Defendants. ..................................................................................... 25 B. The BNP Paribas Defendant. ................................................................................ 27 C. The Citi Defendants. ............................................................................................. 28 D. The Rabobank Defendant...................................................................................... 28 E. The Crédit Agricole Defendants. .......................................................................... 29 F. The Deutsche Bank Defendants. ........................................................................... 31 G. The HS BC Defendants.......................................................................................... 32 H. The JPMorgan Defendants.................................................................................... 33 I. The RBS Defendant. ............................................................................................. 34 J. The Société Générale Defendant........................................................................... 36 K. The UBS Defendant. ............................................................................................. 37 L. The ICAP Defendants. .......................................................................................... 38 AGENTS AND UNNAMED CO-CONSPIRATORS .................................................................. 39 SUBSTANTIVE ALLEGATIONS .............................................................................................. 40 I. Background ....................................................................................................................... 40 A. Euribor: The Euro Interbank Offered Rate ........................................................... 40 B. Euribor-Based Derivatives .................................................................................... 42 1. NYSE LIFFE Three-Month Euribor F utures Contract ................. 42 2. CME Euro Currency Futures Contracts ........................................ 44 3. Foreign Exchange Forwards ......................................................... 46 4. Interest Rate Swaps ....................................................................... 47 5. Forward Rate Agreements ............................................................ 48 II. Euribor Manipulation Conspiracy: Defendants Agreed to and Did Manipulate Euribor to Artificial Levels for Their Financial Gain, to the Detriment of Plaintiffs and Other Market Participants........................................................................................................................ 49 A. Requests for False Euribor Submissions............................................................... 50 i Case 1:13-cv-02811-PKC Document 174 Filed 08/13/15 Page 3 of 214 1. Defendants Coordinated Their Euribor Submissions to Maximize their Impact on the Euribor Fix..................................................... 51 i. Deutsche & Barclays ...................................................... 53 ii. Société Générale: ............................ 55 iii. HSBC : .................................................... 56 iv. Citi: ..................................................... 57 v. BNP Paribas: From Deutsche Through Citi.................................. 59 vi. JPMorgan: ........................ 60 vii. Crédit Agricole: .............. 61 viii. RBS : Hires Moryoussef, Who Continues the Agreement ............ 64 ix. Rabobank: ............................... 65 x. UBS : .................... 66 2. Daily Requests for False Submissions .......................................... 67 3. Defendants’ Management Encouraged and Actively Participated in Their Traders’ and Submitters’ Manipulation of Euribor and the Prices of Euribor-Based Derivatives............................................. 73 B. Defendants Manipulated and Fixed Euribor and the Prices of Euribor-based Derivatives by Pushing Cash in the Market.......................................................... 77 C. Coordination Through Inter-Dealer Brokers: “Spoofing” The Market to Manipulate Other Banks’ Euribor Submissions. .................................................. 83 D. Defendants Executed at Least Three Known Long-Term Campaigns to Rig Euribor .................................................................................................................. 85 1. Long-Term Campaign No. 1: September 2006 through November 2006............................................................................................... 86 i. Raising Euribor in October 2006 .................................................. 88 ii. Lowering Euribor in November 2006 ........................................... 94 2. Campaign No. 2: December 2006 through March 2007 ............... 99 3. Campaign No. 3: January 2007 through March 2007 ................. 107 E. Defendants Made Structural Changes to Support the Manipulation of Both Euribor and Euribor-Based Derivatives. ............................................................. 111 1. Defendants Permitted Manipulative Conduct By Failing to Monitor Their Euribor Submission P rocesses. ......................................... 111 ii Case 1:13-cv-02811-PKC Document 174 Filed 08/13/15 Page 4 of 214 2. Defendants Implemented Lax Compliance Standards That Ignored Manipulative Conduct................................................................. 114 3. Defendants Actively Concealed Their Wrongdoing from Government Regulators .............................................................. 120 III. OTC Derivatives Price Fixing Conspiracy: Defendants Conspired to Fix the Prices of Euribor-Based Derivatives by Coordinating their Activity Instead of Competing for Business in the O ver-The-Counter Market ..................................................................... 124 A. Defendants Agreed On Where to Quote Prices For Euribor-Based Derivatives 124 B. Defendants Engaged in Bid Rigging................................................................... 127 C. Defendants Agreed O n What to Quote In Pricing Run Throughs ...................... 128 D. Defendants Refused to Deal with Certain Customers......................................... 130 E. Defendants Shared Proprietary Pricing Information: ......................................... 131 F. Defendants Transacted With Co-Conspirators at Favorable Prices.................... 133 IV. Defendants’ Manipulative Conduct Directly Impacted Plaintiffs’ and Class Members Euribor-Based Derivatives Positions. ............................................................................. 136 A. Plaintiff Sullivan ................................................................................................. 136 B. Pla intiff W hite Oak ............................................................................................. 138 C. Plaintiff CalSTRS ............................................................................................... 140 D. Plaintiff Sonterra ................................................................................................. 148 E. Plaintiff FrontPoint Australian............................................................................ 149 F. Plaintiff FrontPoint Trading................................................................................ 150 V. The European Commission Fines Defendants Barclays, Deutsche Bank, RBS and Société Générale Over € 1 Billion for Their Participation in The Cartel in Euro Interest Rate Derivatives ...................................................................................................................... 150 VI. The Pricing Structure of the Euribor-Based Derivatives Market Lends Itself—As the Evidence Amassed Thus Far By The Regulators Reveals—To Successful Collusion... 152 A. Defendants’ Employees Are Under Investigation and/or Have Resigned, Been Suspended or Fired,