HSBC, Goldman Rigged Metals’ Prices for Years, Suit Says

By Erik Larson

Platinum ingots. Tomohiro Ohsumi/Bloomberg News

Goldman Sachs Group Inc. (GS) and HSBC Holdings Plc (HSBA) were sued in New York over claims they conspired for eight years to manipulate prices for the precious metals platinum and palladium in what plaintiffs’ lawyers say is the first class-action lawsuit of its kind in the U.S.
Standard Bank Group Ltd. and a metals unit of BASF SE (BAS), the world’s largest chemical company, were also sued. The four companies used inside information about client purchases and sale orders to profit from price movements for the metals used in products ranging from jewelry to cars, according to a complaint filed yesterday in Manhattan federal court.
The lawsuit by Modern Settings LLC, a jeweler that buys precious metals and derivatives set on their prices, claims the companies “were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction” of prices.
Similar lawsuits have been filed this year in
Manhattan accusing banks of rigging the benchmark price for gold. Authorities around the world are examining the gold market for signs of wrongdoing.
Regulators tightened scrutiny of benchmarks after uncovering price-rigging in interbank-loan rates and currencies. Silver became the first precious metal to change its traditional procedure in August, and Intercontinental Exchange Inc. (ICE) will run the replacement for the 95-year-old London gold fixing. A new mechanism for platinum and palladium starts Dec. 1.

Catalytic Converters

Michael DuVally, a spokesman for Goldman Sachs, declined to comment on the lawsuit, as did HSBC spokeswoman Juanita Gutierrez in New York.
Standard Bank’s Johannesburg-based spokesman Ross Linstrom declined to comment today when contacted by e-mail. BASF’s London-based metals unit couldn’t be reached for comment.
The biggest uses of the metals are for jewelery and producing catalytic converters, which curb harmful emissions from vehicles, according to the complaint.
Carmakers’ use of platinum will climb 7.9 percent to a six-year high of 3.39 million ounces this year, and there will be “broad-based growth” next year, auto-catalysts producer Johnson Matthey Plc estimates.
Palladium auto usage will gain 4.9 percent this year to a record 7.3 million ounces. While demand will rise next year, it will likely be at a slower pace, the company predicted. Johnson Matthey makes about one-third of the world’s catalytic converters.

Conference Calls

According to the complaint, the four companies participated in twice-daily conference calls to set global price benchmarks for platinum and palladium, which also affected derivative products based on the precious metals.
“This unlawful behavior allowed defendants to reap substantial profits, while non-insiders, which include plaintiffs and members of the class, were injured,” lawyers for New York-based Modern Settings said in the filing.
Modern Settings needs a judge’s approval before it can represent other buyers of the metals.
The gross demand for platinum and palladium last year was more than 8 million ounces and more than 9.6 million ounces, respectively, according to the complaint.
The case is Modern Settings LLC v. BASF Metals Ltd., 14-cv-09391, U.S. District Court, Southern District of New York (Manhattan).