These consolidated cases involve the alleged manipulation and suppression of silver prices during the period from January 1, 1999 “through the date on which the effects of Defendants’ unlawful conduct cease” (the “Class Period”). The Defendants are: Deutsche Bank,
Plaintiffs are individuals and entities that bought or sold physical silver or silver futures, “mini” silver futures or options contracts through the Chicago Board of Trade (“CBOT”), NYSE LIFFE or Commodity Exchange, Inc. (“COMEX”) during the Class Period.
On October 9, 2014, the United States Judicial Panel on Multidistrict Litigation transferred one related case from the Eastern District of New York to this Court for “coordinated or consolidated pretrial proceedings” with another case that had been filed in this District. In re London Silver Fixing, Ltd., Antitrust Litig.,
BACKGROUND
I. The Silver Fixing
Since 1897, a small group of silver bullion dealers, including the Fixing Members and their predecessors, have met in London (initially in-person and later via teleconference) to set the daily benchmark price of silver. SAC ¶ 95. Throughout the Class Period until August 14, 2014, the Fixing Members, acting through London Silver Market Fixing, Ltd., met over a secure conference call line at 12:00 P.M. London time each business day to “fix” the price of physical silver (the “Silver Fixing” or the “Fixing”). Id. ¶ 96. The Silver Fixing, which usually took less than ten minutes, was conducted through a private “Walrasian” auction. Id. At the outset, the “Chairman” of the auction (a position that rotated among the Fixing Members) would announce the opening price, reflecting the current “spot price” of silver. Id. ¶¶ 96-97. Each of the Fixing Members would then declare how many bars of silver they wished to buy or sell at the opening price based on the net supply or demand for spot silver on their order books (reflecting both client orders and proprietary trading orders). Id. ¶ 97.
After each Fixing Member announced its net order, the banks’ orders would be netted against one another. Id. ¶ 98. If buying and selling interest were roughly equivalent, the Silver Fixing would be declared complete and the price would be declared fixed (the “Fix Price”). Id. Otherwise, the Chairman would adjust the price upward or downward until buying and selling interest reached rough equilibrium, within 300 bars. Id. If the Chairman was unable to set a price that brought the discrepancy between buying and selling interest within 300 bars, the Chairman could unilaterally fix the price and then the Fixing Members would “divide the excess supply or demand pro-rata among themselves.” Id. ¶ 99. Once finalized, the Fix Price was published to the market. Id. No other market participants or third parties played a role in influencing the Fix Price; the Fixing Members had sole control over the auction. Id. ¶¶ 100.
On April 29, 2014, Deutsche Bank left its position as a Fixing Member due to regulatory concerns, ultimately leading to the demise of the Silver Fixing and the creation of the “London Silver Price.” Id. ¶¶ 244-53. The new pricing system uses an electronic trading mechanism, instead of a private telephone call, but otherwise retains an “auction-style process” to determine the Fix Price. Id. ¶ 15. Two of the
II. The Impact of the Fix Price on the Silver Investments
Plaintiffs describe the Fix Price as the global benchmark “used to price, benchmark, and/or settle billions of dollars in physical silver and silver financial instruments” on a daily basis. Id. ¶ 102. According to the London Bullion Market Association: “The guiding principal behind the [precious metal fixings] is that all business ... is conducted solely on the basis of a single published Fixing price.” Id. ¶3 (quoting A Guide to the London Precious Metals Markets, London Bullion Market Association, at 14, http://www.lbma.org.uk/ assets/markeVOTCguide20081117.pdf).
Thus, while there is no single forum or exchange for trading silver and silver-related investments, silver producers, consumers, investors, and central banks rely on the Fix Price in trading approximately $30 billion in silver and silver-related financial instruments each year. Id. ¶ 102. For example, physical silver (including silver bars and coins) is often traded over-the-counter (“OTC”) with reference to the Fix Price. Id. ¶¶ 103-04. The Fix Price also has an impact on the prices of exchange-traded silver futures and options contracts, as well as silver swaps and forward agreements that are traded on an OTC basis. Id. ¶¶ 106-18. Because those instruments reflect a future obligation to buy or sell physical silver, silver “futures” contracts increase or decrease in value in direct relationship to the price of physical silver, such that “99.85% of the variation in the price of COMEX silver futures contracts between January 1, 2004 and December 31, 2013 is explained by the results of the Silver Fix.” Id. ¶¶ 108, 113-14 & Fig. 1.
Most market participants do not settle their futures contracts at maturation; rather they offset their positions before expiry by purchasing contracts for an equal opposite position. Id. ¶ 110. As a result, the holders of “long” positions (who are obligated to purchase silver at an agreed-upon price in the future) profit when the price goes up because they are able to sell their offsetting contracts at a higher price. Id. ¶ 111. In contrast, the holders of “short” positions (who are obligated to sell silver at an agreed-upon price in the future) profit when the price goes down because they are able to buy an offsetting contract for a lower price. Id. Silver forwards work in the same way, the key difference being that they are traded OTC as opposed to via an exchange. Id. ¶ 117. Silver swaps— cash-settled agreements pursuant to which one party pays a fixed price for a certain amount of silver, while the other pays a variable rate subject to the Fix Price—are also Fix-dependent instruments. Id. ¶ 116. Because the Fix Price has a direct impact on the price of physical silver and silver-related financial instruments, such as futures contracts, Plaintiffs allege that the Fixing Members controlled a key factor in the pricing of Plaintiffs’ investments in physical silver, silver futures, “mini” silver futures, and options contracts throughout the Class Period. Id. ¶ 4.
III. Allegations of Manipulation
Plaintiffs claim that Defendants executed a “comprehensive strategy” of manipulation involving several distinct but related components. SAC ¶ 118. First, the Fixing Members allegedly abused their control over the Silver Fixing artificially to suppress the Fix Price on selected days throughout the Class Period. Id. Second, the Defendants are alleged to have im
A. Defendants Caused Price Distortions Around the Silver Fixing
In support of their claim that Defendants manipulated the Fix Price, Plaintiffs present data analyses demonstrating that pricing behaved in distinctive or “anomalous” ways around the Silver Fixing. SAC ¶¶ 119-76. First, Plaintiffs show that, in every year during the Class Period except for 2010, the Fix Price moved downward around the Silver Fixing much more frequently than it moved upward (ie., on approximately 60% to 70% of trading days). Id. ¶¶ 129-30 & Figs. 5-6. In addition, on a large number of trading days from 2008 onward, there was a statistically significant drop in spot silver prices beginning shortly before the Fixing call. Id. ¶¶ 120, 125-27, Fig. 4 & App. A.
Plaintiffs argue that this pattern of downward price swings and negative returns around the Silver Fixing is particularly unusual in light of the fact that, overall, the price of silver was rising throughout most of the Class Period. Id. ¶¶ 138-39. After gradually increasing from 2001 through 2005, a strong bull market
To allege plausibly that Defendants were behind these distinctive or “dysfunctional” pricing patterns, Plaintiff have identified 1900 days, representing slightly less than half of the days within the Class Period through the filing of the SAC, on which Defendants’ below-market quotes in the minutes shortly before and during the Silver Fixing coincide with a downward “reversion,” ie., a change in direction of the prevailing market prices for silver. Id. ¶¶ 155-66 & Figs. 21-28. Beginning in or around May 2012, Plaintiffs further claim that the average duration of the Silver Fixing call began to shorten dramatically, from approximately 4 minutes to less than 2 minutes in length. Id. ¶¶ 167-68 & Fig. 29. Despite the shortened duration of the Silver Fixing call, which on some days lasted less than a minute, Defendants’ below-market quotes leading up to the Fixing continued to correlate with reversion-ary downward shifts in the ultimate Fix Price. Id. ¶¶ 165-68.
Plaintiffs claim that the frequency, intensity and timing of these downward price movements, combined with the facts that (1) Defendants’ spot quotes correlate with the downward trends and (2) silver prices moved downwards at the Silver Fixing even against upward market trends, leads to a strong inference that Defendants intentionally caused these downward price movements through coordinated price manipulation. Id. ¶¶ 119-169.
B. Defendants Profited From Manipulating the Fix Price
Plaintiffs allege that Defendants benefit-ted from manipulating the Silver Fixing by profiting from trades that they strategically placed based on their foreknowledge of the Fix Price. In support of this theory, Plaintiffs demonstrate that downward price movements around the Silver Fixing coincided with a significant spike in trading volume and price volatility. Id. ¶ 140. In particular, Plaintiffs present data from 2007 through 2013 showing a sharp increase in trading in COMEX silver futures contracts, beginning just before the start of the Silver Fixing call and peaking (at a volume more than three-times that of the pre-Fixing volume) just two minutes into the Fixing call, at 12:02 p.m. Id. ¶ 141 & Fig. 14. Plaintiffs point to an allegedly-related pattern in the spot market, in which data from 2007 through 2013 shows that price volatility increased at the beginning of the Fixing call and then peaked while the Fixing call was ongoing. Id. ¶¶ 145-46 & Fig. 15. Plaintiffs posit that trading volume and price volatility should have peaked shortly after the Fix Price was published (not before), in accordance with the economic principle that markets tend to react after the announcement of significant information. Id. ¶¶ 146-47 & Fig. 16. Thus, Plaintiffs argue, the odd volatility is circumstantial evidence that the Fixing Members were trading on their advance knowledge of the Fix Price, and they could only have had such knowledge if they were colluding. Id. ¶ 152.
Plaintiffs also analyzed the time period from 11:55 A.M.-12:05 P.M., the five minutes before and after the start of the Fix
In addition, Plaintiffs rely on statistical analyses to show that traders with advance knowledge of the Fix Price were able to generate significant risk-free returns on the trades they placed at the Fix Price, leading to significant profits. Id. ¶¶ 177-97. Using their foreknowledge of the Fix Price as an “arbitrage condition,” Defendants were able to capture profits in the CO-MEX silver futures market from price swings around the Silver Fixing averaging 25 basis points from 2007 through 2013, which would generate returns of more than 87% per year. Id. ¶¶ 179-80 & Fig. 35. Likewise, in the spot silver market in 2011, Defendants could have used their foreknowledge of the Fix Price to obtain a 40 basis point advantage over uninformed traders, resulting in potential returns of 172% per year. Id. ¶ 181 & Fig. 36. Plaintiffs argue that these significant potential returns, which were available only to those with advance knowledge of the Fix Price, motivated Defendants to collude to set the Fix Price. Id. ¶¶ 182-83 & Fig. 37.
C. Defendants Benefitted From Improperly Sharing and Trading on Confidential Order Information
Plaintiffs assert that Defendants further maximized profits by sharing and trading
D. Defendants Benefitted From Maintaining Supra-Competitive Bid-Ask Spreads
Finally, Plaintiffs assert that Defendants, all of whom are large market makers with respect to silver, used their foreknowledge of the Fix Price to maintain supra-competitive bid-ask spreads that allowed them consistently to purchase silver at artificially low prices and sell it at artificially high prices. Id. ¶¶ 198-200. Because the daily publication of the Fix Price is significant market information, Plaintiffs show that spot and futures bid-ask spreads in the silver market generally tend to be wider (reflecting less certainty) before the Fix Price is published, and narrower (re-fleeting relatively more certainty) after the Fix Price is published. Id. ¶¶ 201-05 & Figs. 44-46. Plaintiffs present data from 2000-2013 showing that, unlike other market participants, whose spot and futures bid-ask spreads tended to narrow upon the publication of the Fix Price, Defendants’ spot bid-ask spreads stayed the same or widened at the Silver Fixing, suggesting that Defendants did not regard the Fix Price as “new” information. Id. ¶¶ 206-07 & Fig. 47. By maintaining these artificially wide spreads, Defendants were able to buy lower and sell higher than they otherwise would have had they been responding to the Fix Price as true market competitors. Id. ¶¶ 198, 200.
IV. Regulatory Investigations
Plaintiffs rely on various regulatory findings to suggest that Defendants were capable of conspiring to manipulate the Silver Fixing. Plaintiffs note that various regulatory agencies, including the U.S. Department of Justice (“DOJ”), the U.S. Commodity Futures Trading Commission (“CFTC”), the German Federal Financial Supervisory Authority (“BaFin”), the Swiss Financial Market Supervisory Authority (“FINMA”) and the United Kingdom’s Financial Conduct Authority have scrutinized or investigated possible rigging of the precious metals markets by Defendants. Id. ¶¶ 235-39,242.
In particular, Plaintiffs highlight FIN-MA’s allegations of misconduct following its investigations into UBS’s trading in the foreign exchange (“FX”) and precious metals markets. Id. ¶242. On November 12, 2014, FINMA released a report (the “FINMA UBS Report”) finding that UBS precious metals traders had engaged in conduct against the interests of UBS, in
DISCUSSION
I. Legal Standard
In evaluating a motion to dismiss, the Court must “ ‘accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.’ ” Meyer v. JinkoSolar Holdings Co.,
II. Plaintiffs Have Constitutional Standing
Plaintiffs must establish both constitutional standing and, with respect to their antitrust claims, antitrust standing. Gelboim v. Bank of Am. Corp., 823 F.3d
The Fixing Members argue that, because Plaintiffs were likely both buyers and sellers who traded at various times throughout the trading day, “there is no way to conclude that Plaintiffs sustained any loss as a result of Defendants’ conduct,” suggesting that Plaintiffs have not asserted an injury-in-fact. Defs.’ Mem. at 32-33.
III. Plaintiffs Have Antitrust Standing
Section 4 of the Clayton Act establishes a private right of action to enforce Section 1 of the Sherman Act. 15 U.S.C. •§ 15.
A. Plaintiffs Have Adequately Alleged an Antitrust Injury
“ ‘Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation,’ ” AGC,
In Gelboim, the Second Circuit held that the manipulation of LIBOR rates by banks that participated in the LIBOR benchmarking process gave rise to an antitrust injury on the part of the plaintiffs who transacted in LIBOR-dependent financial instruments.
Here, Plaintiffs allege that they were harmed by being forced to sell silver and silver derivatives at artificially suppressed prices as a result of Defendants’ manipulation of the Silver Fixing. Because Plaintiffs have alleged that their “loss[es] stem[ ] from a competition -reducing aspect or effect of the [D]efendant[’s] behavior,” Atl. Richfield Co. v. USA Petroleum Co.,
In another recent decision, the Second Circuit clarified that, although as a general rule only participants in the defendant’s market can claim an antitrust injury, plaintiffs in an affected secondary market may have antitrust standing if then-alleged injuries are “ ‘inextricably intertwined’ with the injury the defendants ultimately sought to inflict” and if their injuries are “the essential means by which defendants’ illegal conduct brings about its ultimate injury to the marketplace.” In re Aluminum Warehousing Antitrust Litig.,
While the Fixing Members did not raise this theory in their Motion to Dismiss, in light of the Second Circuit’s In re Aluminum Warehousing opinion, they now argue that Plaintiffs cannot assert an antitrust injury because they did not directly participate in the Silver Fixing, which the Fixing Members define as the only “directly impacted” market. See Letter from Joel S. Sanders to the Court, dated August 16,
Even assuming that the Fixing Members’ argument was properly asserted, the Fixing Members fail to explain why the Fixing itself (which all parties acknowledge to be an artificially-constructed private “auction” that was instituted for the sole purpose of allowing the Fixing Members to set a market-wide benchmark) should be considered the affected “market” for antitrust purposes. While the guiding precedent leaves room for debate regarding how the “market” should be defined under the circumstances of this case, the suggestion that the alleged conspirators are the only entities with standing to bring antitrust claims relating to the Silver Fixing seems absurd.
Here, Plaintiffs allege that Defendants artificially depressed the price of silver for some period of time around the Fixing in order to profit from silver and silver futures trading at prices that were advantageous to them vis á vis Plaintiffs and other less-informed market participants. These allegations are sufficient to demonstrate that Plaintiffs’ injuries are “inextricably intertwined” with the Defendants’ alleged manipulation of the Fix Price for antitrust standing purposes to the extent that Defendants relied on Plaintiffs’ and other market participants’ trading on a manipulated Fix Price in order to carry out their alleged scheme. The Court therefore finds that Plaintiffs have adequately stated an antitrust injury.
B. Some Plaintiffs Have Established That They Are Efficient Enforcers
The Second Circuit has identified four factors to be considered in determining whether a particular plaintiff has standing as an “efficient enforcer” to seek damages under the antitrust laws:
(1) whether the violation was a direct or remote cause of the injury; (2) whether there is an identifiable class of other persons whose self-interest would normally lead them to sue for the violation; (3) whether the injury was speculative; and (4) whether there is a risk that other plaintiffs would be entitled to recover duplicative damages or that damages would be difficult to apportion among possible victims of the antitrust injury.... Built into the analysis is an assessment of the “chain of causation” between the violation and the injury.
Gelboim,
1. Plaintiffs Have Demonstrated a Sufficiently Direct Injury
Evaluating the directness of an injury is essentially a proximate cause analysis that hinges upon “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.” Lexmark,
As an appendix to the SAC, Plaintiffs have provided a list of the dates, quantities, and types of silver investments that Plaintiffs sold on days when Defendants are alleged to have manipulated the Silver Fixing. SAC App. D at 13-26. Plaintiffs do not state the actual prices or times at which they sold their silver investments but instead allege that they sold their silver investments at prices that were “directly and artificially impacted by the Silver Fisting].” SAC ¶230. Plaintiffs elsewhere allege that the silver investments they sold were “priced, bench-marked, and/or settled to the Fix Price.” Id. ¶ 3.
With respect to physical sellers, the SAC alleges that Plaintiffs’ OTC trades for physical silver were priced “by reference to the Fix [P]rice,” id. ¶ 103, and it appears that Plaintiffs who sold silver bars or coins on the American Precious Metals Exchange may have transacted at a price representing the Fix Price plus a premium, id. ¶ 104 n.29. Plaintiffs do not, however, clearly define the relationship between the Fix Price (which is only set once daily), spot pricing (“which is always changing (just like a normal stock changing minute-by-minute throughout the day”)), and the exact prices at which Plaintiffs sold silver during the Class Period. See First Time Buyers FAQs, APMEX, http://www. apmex.com/first-time-buyer (cited in SAC ¶ 104 n.29); see also SAC App. D. With respect to sellers of silver futures and options, Plaintiffs claim that “the value of these contracts is directly tied to the price of physical silver,” id. ¶ 109,
The Fixing Members rely on several lines of cases to argue that, regardless of whether Plaintiffs sold physical silver or silver derivatives, their claims are too indirect and remote to confer antitrust standing. First, the Fixing Members argue that Plaintiffs lack standing because “only direct purchasers of [the] monopolized product ]” have antitrust standing, and Plaintiffs did not transact directly (or indirectly)
This argument, however, mischaracter-izes Plaintiffs’ claims. Plaintiffs do not allege that Defendants suppressed the price of a particular bar of silver that was later sold through a distribution chain to Plaintiffs but rather that Defendants suppressed the Fix Price, which had a direct (and negative) impact on the value of their silver investments. SAC ¶¶ 102-118. In addition, the Fixing Members overreach when they suggest that Illinois Brick has been interpreted to deny standing to every plaintiff who is not in direct privity with the defendant. Defs.’ Mem. at 29. Indeed, since Illinois Brick was decided, courts have found that differently-situated plaintiffs may have standing to assert antitrust injuries, provided that each plaintiff suffered a unique and sufficiently direct injury as a result of defendants’ anticompeti-tive conduct. See, e.g., Blue Shield of Va. v. McCready,
Next, the Fixing Members argue that Plaintiffs’ alleged injuries are raised under a so-called “umbrella theory” of liability, which has not been well-received by at least some courts in this Circuit. Defs.’ Mem. at 29-30 (citing cases). “Umbrella standing concerns are most often evident when a cartel controls only part of a market, but a consumer who dealt with a non-cartel member alleges that he sustained injury by virtue of the cartel’s raising of
In the typical umbrella liability case, plaintiffs’ injuries arise from a transaction with a non-conspiring retailer who is able, but not required, to charge supra-competitive prices as the result of defendants’ conspiracy to create a pricing “umbrella.” See, e.g., Pollock v. Citrus Assocs. of N.Y. Cotton Exch., Inc.,
As the Second Circuit made clear in Gelboim, under such circumstances, there appears to be little, if any, difference between the injuries suffered by market participants who sold silver to one of the Defendants (the alleged cartel members) and those who sold to non-conspiring third-parties. Gelboim,
2. Some Plaintiffs Are Sufficiently Direct and Interested Victims for Purposes of Enforcing the Antitrust Laws
As alluded to, swpra, the Court is convinced that at least some subset of Plain
3. Standing Is Not Defeated By the Risks of Speculative Injuries, Du-plicative Damages and Difficulties in Apportioning Damages
Standing may be lacking where courts would otherwise be required to engage in “hopeless speculation concerning the relative effect of an alleged conspiracy in the [relevant markets] ..., where countless other market variables could have intervened to affect [] pricing decisions.” Reading Indus., Inc. v. Kennecott Copper Corp.,
Plaintiffs do not deny that other market variables may have affected silver prices before and after the Silver Fixing. (Indeed, were it otherwise, pricing across silver markets would essentially be flat, varying only once a day at the 12:00 P.M. Silver Fixing.) And, while Plaintiffs allege that Defendants’ price suppression lingered long after the end of the Fixing call, a significant evidentiary record will need to be developed before the Court can determine what role any such lingering suppression played in the losses suffered by Plaintiffs at various points throughout the trading day in the different markets in which they traded.
Nonetheless, because exogenous factors affect price movements in most antitrust cases and the existence of such factors does not alone defeat standing, the Court finds that issues regarding the speculative nature of Plaintiffs’ injuries and damages can best be resolved at a later stage. See Grosser v. Commodity Exch., Inc.,
Finally, with respect to damages, the Court finds that here, as in the LIBOR cases, “it is difficult to see how [Plaintiffs] would arrive at [a “just and reasonable estimate of damages”], even with the aid of expert testimony. Gelboim,
IV. Plaintiffs Adequately Allege an Unlawful Agreement to Fix Prices and Restrain Trade from January 1, 2007 through December 31, 2013
Plaintiffs bring claims for price fixing, bid rigging, and conspiracy in restraint of trade under Section 1 of the Sherman Act. “Horizontal price fixing— that is, price fixing by competitors in the same market—is per se illegal.” In re Aluminum Warehousing Antitrust Litig., 95
To allege an unlawful agreement, Plaintiffs must assert either direct evidence (such as a recorded phone call or email in which competitors agreed to fix prices) or “circumstantial facts supporting the inference that a conspiracy existed.” Mayor & City Council of Baltimore (City of Baltimore) v. Citigroup, Inc.,
Here, Plaintiffs clear the plausibility standard, albeit barely, with respect to their price-fixing and unlawful restraint of trade claims under Section 1 based on allegations that the Fixing Members conspired opportunistically to depress the Fix Price between January 1, 2007 and December 31, 2013.
Plaintiffs allege that Defendants engaged in parallel conduct , by opportunistically causing “reversions” in spot pricing in advance of the Silver Fixing. In particular, Plaintiffs claim to have identified 1900 days during the Class Period on which Defendants’ below-market spot quotes leading up to the Fixing allegedly caused downward “reversions” in the spot market, leading to the artificial suppression of the Fix Price. Id. ¶¶ 155-66, Figs. 21-28, App. D. The SAC describes in detail six such days in which two or more Defendants appear to offer spot quotes that correlate with a downward trend in silver prices leadings up to the Silver Fixing. Id. ¶¶ 155-66 & Figs. 21-28.
The Fixing Members correctly argue that this pattern of conduct is, without more, of limited persuasive value. While Plaintiffs make a modest showing that different pairs or groupings of Defendants routinely lowered their quotes in advance of the Fixing, Plaintiffs acknowledge that other non-Defendant market participants (including BNP Paribas and others) quoted similar prices, without any evidence that Defendants were the ones causing, rather than merely responding to, these pricing declines. Defs.’ Mem. at 17 & n.14 (citing SAC ¶¶ 158-60). Courts have long observed that a mere showing of parallel conduct or interdependence, which may be “consistent with conspiracy, but [is] just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market” is insufficient to state a claim under Section 1. Twombly,
B. Plaintiffs’ Allegations of Plus Factors
A conspiracy may, however, be “inferred on the basis of conscious parallelism, when such interdependent conduct is accompanied by circumstantial evidence and plus factors.” City of Baltimore,
Here, Plaintiffs argue that there are “at least seven” plus factors from which a conspiracy to fix prices and restrain trade may plausibly be inferred. Pls.’ Opp. at 17-20. Several of these are clearly unavailing. For example, Plaintiffs’ allegations that the structure of the Silver Fixing, itself, including the fact that the auction occurred via private telephone call, cannot be counted as a “plus factor.” Pis.’ Opp. at 18-19. In so finding, the Court notes that this case is different from many (and maybe most) antitrust conspiracy cases in which the defendants’ misconduct and supporting communications occur in secret, outside the public eye. Here, in
The Court further disagrees with Plaintiffs’ assertion that the ongoing government investigations into possible manipulation of the precious metals markets and the investigations into FX and LIBOR constitute a “plus factor.” Pis.’ Opp. at 19. Even if the Court accepts these allegations (which Defendants argue should be stricken as irrelevant), Defs.’ Mem. at 26-27, UBS Mem. at 5-8, evidence of Defendants’ wrongdoing with respect to LIBOR and FX and the mere existence of regulatory investigations into the precious metals markets do not substantiate Plaintiffs’ antitrust claims with respect to the Silver Fixing. While not irrelevant, the mere fact that Defendants UBS and HSBC traded precious metals during the Class Period from their FX desks, SAC ¶ 13, and were fined for misconduct associated with their FX trading, does not constitute evidence that UBS and HSBC (let alone the Fixing Members as a group) used the same techniques in trading silver. Moreover, Plaintiffs’ efforts to infer wrongdoing from Defendants’ misconduct in the FX context is significantly hampered by the fact that the private plaintiffs in those cases cited to direct evidence of manipulation and government findings of collusion, whereas no similar allegations are present here. This is so notwithstanding the fact that government investigations into the Silver Fixing have been ongoing for well over two years and that Plaintiffs have alleged that Defendants were colluding in chat rooms and via other forms of electronic communication throughout the trading day, communications that the Government has presumably obtained and reviewed.
The FINMA UBS Report found that UBS precious metals traders had shared client names and order information with unidentified “third-parties,” intentionally triggered client stop-loss orders, and engaged in front-running, id. ¶¶ 79, 220, 224 (citing FINMA UBS Report at 10, 12), but UBS was not a Fixing Member, and Plaintiffs have alleged no facts suggesting that UBS was specifically sharing information or conspiring with any of the Fixing Members with respect to silver trades. Indeed the FINMA UBS Report noted that a “substantial element” of the misconduct in the precious metals desk was confined to the repeated front running of a single client’s Fix orders, which does not suggest any conspiratorial participation on the part of the Fixing Members. UBS Mem. at 6 n.5 (citing FINMA UBS Report at 12). Significantly, none of the regulatory investigations cited by Plaintiffs has advanced to the point of charging any of the Defendants with colluding to manipulate the price of silver, and DOJ’s Antitrust Division has closed its investigation without
Nevertheless, Plaintiffs adequately allege other circumstantial evidence and “plus factors” that, taken together, advance their claims from the realm of the possible to the realm of the plausible. In particular, Plaintiffs provide economic analyses showing not only the existence of unusual or “dysfunctional” pricing behavior around the Silver Fixing but also demonstrating that the Fixing Members had a “common motive” collectively to manipulate the Fix Price. City of Baltimore,
Plaintiffs’ theory is further corroborated by analyses showing that, from 2007 through 2013, trades of COMEX silver futures placed during the Silver Fixing window were more than twice as accurate in predicting the direction of the Fix Price than those placed before the Fixing call. Id. ¶¶ 149-52 & Fig. 18. Those analyses provide further circumstantial evidence that the Fixing Members, as opposed to less informed market participants, were behind the increased volume in futures trading during the Fixing call. Id. The fact that the predictive accuracy of futures trading during the Fixing increased to over 90% when particularly large returns were available lends further plausibility to the theory that the Fixing Members were motivated to, and did, trade on advance knowledge of the Fix Price while the Fixing calls were ongoing. Id. ¶ 152 & Fig. 18.
Finally, Plaintiffs’ allegations that Defendants’ bid-ask spreads did not respond to the Fix Price, remaining artificially wide so that Defendants were able to buy low and sell high, is another factor, however slight, tending to show that the outcome of the Fixing auction was not news to the Defendants. Id. ¶¶ 198-207 & Figs. 43-47. Whether or not Plaintiffs’ theory—that the Defendants’ were able to offer supracom-petitive bid-ask spreads based on their foreknowledge of the Fix Price—ultimately holds water is a question for a later time. At the pleading stage, however, Defendants’ disproportionately wide bid-ask spreads constitute another piece of circumstantial evidence suggesting that the Defendants may have conspired to manipulate the Fix Price.
The Fixing Members’ arguments to the contrary are unpersuasive. Characterizing Plaintiffs’ theory as one merely alleging “persistent suppression” of silver prices, they argue that Plaintiffs’ allegations as to motive are implausible because Plaintiffs do not claim that Defendants held “net short” futures positions throughout the Class Period, “a prerequisite if Defendants were to gain from persistent, long-term price suppression.” Defs.’ Mem. at 17-18. But rather than alleging that Defendants constantly suppressed the Fix Price on a daily basis, Plaintiffs instead allege that Defendants opportunistically (albeit frequently) suppressed the Fix Price in order to create, and then capitalize on, arbitrage conditions, particularly in the market for silver futures. See SAC ¶¶ 149-54, 177-97.
Finally, the Fixing Members argue that Plaintiffs’ economic analyses cannot be relied upon because they are based on the work of “paid experts”
In short, the Court finds that Plaintiffs have plausibly alleged an antitrust conspiracy and price fixing from 2007 through 2013 with respect to the Fixing Members. Plaintiffs adequately allege that the Fixing Members, horizontal competitors in the relevant markets for physical silver and silver derivatives, conspired artificially to suppress the Fix Price in order to gain an unfair trading advantage over other market participants, causing Plaintiffs to suffer losses on their silver investments. Be
V. Plaintiffs Fail to State a Claim of Bid Rigging
In contrast to Plaintiffs’ price fixing and unlawful restraint of trade claims, Plaintiffs have not alleged any facts supportive of a claim for bid rigging. Claims for bid rigging typically apply where bidding parties conspire to increase the price ultimately paid by the purchaser by artificially altering their bids or agreeing to abstain from bidding entirely. See, e.g., Shaw v. United States,
Plaintiffs allege that Defendants engaged in bid rigging by “rig[ing] the supposedly ‘Walrasian’ auction of the Silver Fix,” SAC ¶ 280, but Plaintiffs ignore the fact that the auction process was a benchmarking mechanism, not a bidding process for any particular contract, project or transaction. Because there was no purchaser on the other side of the Fixing auction, and because Plaintiffs allege no additional facts in support of their bid rigging claim, the Fixing Members’ Motion to Dismiss Plaintiffs’ bid rigging claim is granted.
VI. Plaintiffs Have Standing to Assert CEA Claims
Under section 22(a) of the CEA, a plaintiff has standing to bring a commodities manipulation action only if he or she suffered “actual damages” as a result of a defendant’s manipulation. 7 U.S.C. § 25(a)(1). To establish “actual damages” a plaintiff must show an “actual injury caused by the violation,” In re LI-BOR-Based Fin. Instruments Antitrust Litig. (LIBOR II),
The Fixing Members argue that Plaintiffs lack CEA standing because Plaintiffs fail to allege that they transacted in the “moments immediately before and after the Silver Fix.” Defs.’ Mem. at 45. But Plaintiffs allege that the effects of Defendants’ manipulation persisted beyond the Fixing window. SAC ¶¶ 173-76 & Figs. 33-34. While the Fixing Members correctly point out that Plaintiffs’ allegations of
Under such circumstances, allegations that Plaintiffs sold a particular quantity of silver futures on specifically identified dates when Defendants are alleged to have artificially suppressed the Fix Price are sufficient for CEA standing purposes. Compare In re Amaranth Nat. Gas Commodities Litig.,
VII. Plaintiffs Adequately Allege Price Manipulation
Plaintiffs assert claims under CEA Section 9(a)(2), 7 U.S.C. § 13(a)(2), which makes it unlawful for “any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce.” Although manipulation claims that sound in fraud may be evaluated under the more stringent pleading requirements of Fed. R. Civ. P. 9(b), In re Amaranth Nat. Gas Commodities Litig.,
Although Plaintiffs characterize their claims as merely asserting an “abuse of market power,” the SAC actually alleges that Defendants submitted false and misleading auction bids and otherwise colluded to manipulate the Fix Price in order to gain an unfair short-term trading advantage over other market participants; those allegations likely “sound in fraud.” See, e.g., In re Crude Oil Commodity Litig., No. 06-cv-6677 (NRB),
In alleging fraud or mistake under Rule 9(b), “a party must state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This standard is generally relaxed in the context of manipulation-based claims, ATSI Commc’ns, Inc. v. Shaar Fund, Ltd.,
To establish a claim for price manipulation under the CEA, Plaintiffs must allege that: “(1) Defendants possessed an ability to influence market prices; (2) an artificial price existed; (3) Defendants caused the artificial prices; and (4) Defendants specifically intended to cause the artificial price.” In re Amaranth Nat. Gas Commodities Litig.,
With respect to the first element, Defendants do not dispute that Plaintiffs have adequately pleaded that each of the Fixing Members possessed the ability to manipulate the silver futures market by virtue of its role as a market maker and participant in the Fixing auction.
With regard to artificiality, viewing the allegations in the light most favorable to Plaintiffs, the Court finds that Plaintiffs have adequately pleaded the existence of artificial prices around the Silver Fixing. “An artificial price is a price that ‘does not reflect basic forces of supply and demand.’ ” Parnon,
Plaintiffs allege that a dysfunction in silver pricing dynamics is reflected in a 7-year pattern of sharp downward price swings accompanied by a spike in highly predictive futures trading and price volatility occurring frequently (and uniquely)
With regard to scienter, specific intent to manipulate prices can be pleaded by “alleging facts (1) showing that the defendants had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial evidence of conscious misbehavior or recklessness.” Amaranth I,
Plaintiffs further allege that each of the Fixing Members acted recklessly in creating artificial price dynamics in the silver markets around the Fixing. As the sole contributors to the Fixing auction, the Fixing Members were no doubt aware of their ability to influence the Fix Price
Finally, Plaintiffs have sufficiently pleaded that the Fixing Members’ alleged misconduct was the “proximate cause of the price artificiality.” Silver I,
VIII. Plaintiffs Adequately Allege Manipulative Device Claims After August 15, 2011
Plaintiffs bring claims under CEA Section 6(c)(1), 7 U.S.C. § 9(1), and CFTC Rule 180.1, which make it unlawful for any person to “use or employ ... in connection with any swap, or a contract of sale of any commodity ... any manipulative or deceptive device or contrivance, in contravention
The Fixing Members argue that because Rule 180.1 did not become effective until August 15, 2011, Plaintiffs’ manipulative device claim based on pre-August 15, 2011 conduct must be dismissed. Defs.’ Mem. at 42. The Court agrees. See In re Amaranth Nat. Gas Commodities Litig.,
With respect to these three transactions, the Fixing Members argue that Plaintiffs’ manipulative device claims fail because Plaintiffs have not alleged: (1) a manipulative act, (2) performed in connection with a swap, or contract of sale of a commodity, (3) scienter, (4) reliance, (5) économic loss, and (6) loss causation. Defs.’ Mem. at 42 (citing securities cases). For the reasons articulated supra, Plaintiffs have satisfied their burden to allege that the Fixing Members engaged in manipulative acts in connection with the sale of commodities, scienter,
While the case law is scarce on this point, the Court finds that, under the circumstances of these consolidated actions, Plaintiffs have satisfied their pleading burden. In Ploss, the court assumed that misrepresentation-based claims require reliance and loss causation to be alleged separately and with particularity,
IX. Plaintiffs Adequately Allege Aiding and Abetting and Principal-Agent Liability
Section 22 of the Commodity Exchange Act creates liability for any person “who willfully aids, abets, counsels, induces, or procures the commission of a violation” of the CEA. 7 U.S.C. § 25(a)(1). A claim for aiding and abetting liability under the CEA requires that the defendant “associate himself with the venture, that he participate in it as in something
As previously described, Plaintiffs adequately allege that, as participants in the Fixing, the Fixing Members unlawfully conspired to manipulate silver prices and restrain trade. See Section IV, supra. Plaintiffs’ conspiracy allegations, particularly with respect to Defendants’ rever-sionary price quotes leading up to the Fixing, non-reactive bid-ask spreads, and patterns of downward price swings coinciding with volume spikes in silver futures trading are sufficient to state an aiding and abetting claim. See Laydon,
Plaintiffs’ claim for principal-agent liability is also well-pled. The liability of a principal for the acts of its agents is governed by Section 2(a)(1)(B) of the CEA. 7 U.S.C. § 2(a)(1)(B). Under that provision, a claim for principal-agent liability requires that the agent was acting in the capacity of an agent when he or she committed the unlawful acts and that the agent’s actions were within the scope of his or her employment. Guttman v. CFTC,
X. Statute of Limitations and Tolling
A. Plaintiffs’ Antitrust Claims
Plaintiffs’ antitrust claims are subject to a four-year statute of limitations.
B. Tolling
Plaintiffs have sufficiently alleged that the applicable statutes of limitations may be subject to tolling based on fraudulent concealment. To show fraudulent concealment, “an antitrust plaintiff must prove (1) that the defendant concealed the existence of the antitrust violation[;] (2) that plaintiff remained in ignorance of the violation until sometime within the ... statute of limitations; and (3) that his continuing ignorance was not the result of lack of diligence.” Nine West Shoes,
As to the first factor, a plaintiff may prove concealment by showing “either that the defendant took affirmative steps to prevent the plaintiffs discovery of his claim or injury or that the wrong itself was of such a nature as to be self-concealing.” Hendrickson Bros.,
As for the second element, as described supra, Plaintiffs have adequately alleged
With respect to the third element, a “plaintiff will prove reasonable diligence either by showing that: (a) the circumstances were such that a reasonable person would not have thought to investigate, or (b) the plaintiffs attempted investigation was thwarted.” See In re Publ’n Paper Antitrust Litig., No. 304-md-1631 (SRU),
C. Plaintiffs’ CEA Claims
CEA claims must be brought “not later than two years after the date the cause of action arises.” 7 U.S.C. § 25(c). Because the CEA does not define when a cause of action accrues, “courts apply a ‘discovery accrual rule’ wherein ‘discovery of the injury, not discovery of the other elements of a claim, is what starts the clock.’ ” LIBOR I,
The Fixing Members argue that Plaintiffs were on inquiry notice as of September 2008, when, as the SAC acknowledges, the “CFTC announced that it was investigating complaints of misconduct in the silver market.” Defs.’ Mem. at 47 (quoting SAC ¶ 243 n.74). That investigation, however, involved the alleged manipulation of COMEX silver futures relative to retail silver prices rather than manipulation of the Silver Fixing. Pls.’ Opp. at 49 n.48 (citing SAC ¶ 243). As such, the 2008 CFTC investigation would not have put Plaintiffs on inquiry notice of their claims here. Based on the SAC, it appears that Plaintiffs would not have been on inquiry notice of the alleged manipulation prior to January 2014,
XI. Plaintiffs’ Unjust Enrichment Claim Fails
Under New York law, a claim for unjust enrichment requires that “‘(1) [the] defendant was enriched, (2) at plaintiffs expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.’ ” Diesel Props S.r.l. v. Greystone Bus. Credit II LLC,
The Fixing Members argue that Plaintiffs’ unjust enrichment claim fails because Plaintiffs have not alleged that they had any “relevant relationship” with the Defendants or that Defendants received any benefit to which they were not entitled at Plaintiffs’ expense. Defs.’ Mem. at 50. The Court agrees. Because Plaintiffs have failed to allege that they had any relevant relationship with the Defendants or that Defendants were enriched at Plaintiffs’ expense, the SAC fails to state a claim for unjust enrichment. See, e.g., Bazak Int’l Corp. v. Tarrant Apparel Grp.,
XII. Plaintiffs Fail to State a Claim Against UBS
Each of Plaintiffs’ claims is based upon their premise that the Fixing Members improperly used their private daily Fixing call to conspire to suppress silver prices. Because UBS was not a Fixing Member and never participated in the Silver Fixing, and because Plaintiffs fail to allege that UBS caused Plaintiffs’ injuries, whether acting separately or in concert with the Fixing Members, Plaintiffs fail to state a claim against UBS.
With respect to Plaintiffs’ antitrust claims, Plaintiffs fail to allege parallel conduct, circumstantial evidence, or plus factors suggesting that UBS had an agreement with the Fixing Members to manipulate the Fixing. UBS was not a party to the private Fixing calls, and Plaintiffs fail to identify a single communication between UBS and the Fixing Members suggestive of manipulative conduct. The fact that UBS is a market maker and a large bullion bank does not constitute circumstantial evidence of misconduct; such allegations could apply to any number of large banks, none of which is (or could be) named as defendants on that basis. Finally, while FINMA fined UBS for misconduct in the FX and precious metals markets, nothing in the FINMA UBS Report plausibly supports Plaintiffs’ conspiracy allegations here. In particular, FINMA’s findings that UBS shared order information with “third parties” and engaged in “conduct against the interests of [UBS’s] own clients,” FIN-MA UBS Report at 12, including the repeated front running of one client’s silver fix orders, does not support Plaintiffs allegation that UBS conspired with the Fixing Members (or others) to manipulate the Silver Fixing, SAC ¶¶ 220, 224.
At best, Plaintiffs allege that UBS engaged in parallel conduct by offering (along with the Fixing Members) below-market quotes around the Fixing that coincided with downward reversions in the price of silver. SAC ¶¶ 155-66 & Figs. 21-28. But allegations of parallel conduct “must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Twombly,
Plaintiffs’ CEA claims against UBS fail for similar reasons. Both Plaintiffs’ price manipulation and manipulative device claims require allegations that UBS caused (and intended to cause) the artificial price in question. In re Amaranth Nat. Gas Commodities Litig.,
XIII. Leave to Amend
Under Rule 15(a) of the Federal Rules of Civil Procedure, “[t]he court should freely give leave” to a party to amend its complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2). “Leave may be denied ‘for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party.’ ” Techno-Marine SA v. Giftports, Inc.,
CONCLUSION
For the foregoing reasons, UBS’s Motion to DISMISS is GRANTED in its entirety. The Fixing Members’ Motion to Dismiss is GRANTED IN PART and DENIED IN PART. The Fixing Members’ Motion to Dismiss is GRANTED with respect to Plaintiffs’ antitrust claims for price fixing and unlawful restraint of trade from the beginning of the Class Period through December 31, 2006, and from January 1, 2014 through the end of the Class Period. The Fixing Members’ Motion to Dismiss is further GRANTED with respect to Plaintiffs’ manipulative device claims from the beginning of the Class Period through August 15, 2011, and with respect to Plaintiffs’ claims for bid-rigging, and unjust enrichment.
The Fixing Members’ Motion to Dismiss is DENIED with respect to Plaintiffs’ antitrust claims for price fixing and unlawful restraint of trade from January 1, 2007 through December 13, 2013. The Fixing Members’ Motion to Dismiss is further DENIED with respect to Plaintiffs’ price manipulation claims, Plaintiffs’ manipulative device claims after August 15, 2011 and Plaintiffs’ aiding and abetting and principal-agent claims. The Clerk of Court is respectfully directed to close the open motions at docket numbers 73 and 75. Plaintiffs’ deadline to show good cause why leave to replead should be granted is October 17, 2016.
The parties must appear for a pretrial conference on October 28, 2016 at 3:00 p.m. in courtroom 443 of the Thurgood Marshall Courthouse, 40 Foley Square, New York, NY 10007. The parties, together with the parties in In re Commodity Exch., Inc., Gold Futures & Options Trading Litig., No. 14-md-2548 (VEC), must meet and confer regarding a proposed schedule for discovery and class certification. The parties are required to submit a
SO ORDERED.
Notes
. Named entities include Deutsche Bank AG and its subsidiaries and affiliates, including Deutsche Bank Securities Inc. On April 13, 2016, Plaintiffs notified the Court that they had reached a settlement with Deutsche Bank, although no motion for approval of a settlement class has yet been presented to the Court.
. Named entities include HSBC Holdings pic and its subsidiaries and affiliates, including HSBC Bank USA, N.A.
. Named entities include Bank of Nova Scotia and its subsidiaries, affiliates and divisions, including Defendant Scotia Capital (USA) Inc. and ScotiaMocatta.
. While the named Plaintiffs characterize themselves as those who "purchased and/or sold” silver investments, Plaintiffs' claimed damages focus on investors who sold silver investments at allegedly artificially depressed prices during the Class Period. See Second Consolidated Class Action Complaint, Appendix D.
. Unless otherwise noted, citations to the docket shall be to the MDL case docket for these consolidated actions, 14-md-2573.
. The facts are taken from the Second Amended Complaint.
. Despite the fact that the Class Period begins in 1999, most of the aberrational pricing patterns alleged by Plaintiffs do not emerge until 2007. See id. App'x A, B.
. Plaintiffs' data shows a similarly significant, though slightly smaller, price decline around the closing of the COMEX trading day. See id. Fig. 3.
. Notably, one of the experts relied on by Plaintiffs takes the position that these downward swings may have been part of a short-term trading strategy. See Defs.’ Mem. at 24-25 (citing Ex. 1). Defendants argue that Plaintiffs’ claim of “persistence” fails as a result, but this simply raises a question of fact—an interesting one and one that could have a profound effect on damages and class certification—that cannot be resolved at the pleading stage.
. Plaintiffs further allege that Defendants were particularly well-positioned to profit from their advance knowledge of the Fix Price due to their "large unhedged trading positions." Id. ¶¶ 208-212 & Figs. 48-51. This conclusion is substantially undermined, however, by the fact that Plaintiffs lack data on Defendants’ trading positions with respect to silver, in particular, and they also lack comparative hedging information for UBS and Deutsche Bank. Id.
. During oral argument on Defendants’ Motion to Dismiss, Defendants noted, however, that DOJ’s Antitrust Division had closed its investigation into alleged manipulation of the precious metals benchmarks. Transcript of Oral Argument dated April 18, 2016 ("Tr.”) at 8:5-9:13.
. HSBC was also sanctioned by the CFTC in connection with manipulation of the FX markets. Id. ¶219 & n.45. Among other things, the CFTC found that HSBC traders had shared the "size and direction of [HSBC]'s net orders” in private chatrooms with other traders. Id.
. Plaintiffs’ theory appears to be that, because the same personnel may have been responsible for trading FX and precious metals, misconduct in the EX markets may have been duplicated in the silver market. Id. ¶ 13.
. While the Fixing Members do not address constitutional standing separately from antitrust standing, their arguments regarding Plaintiffs’ alleged injuries are relevant to both inquiries. The Court must consider both in evaluating subject matter jurisdiction at the pleading stage. Lance v. Coffman,
. Section 4 of the Clayton provides:
[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue ... in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.
15 U.S.C. § 15(a).
. In their Motion to Dismiss, the Fixing Members originally argued that Plaintiffs failed to assert an antitrust injury because, even if accepted as true, Plaintiffs’ alleged injuries would have resulted merely from Defendants’ purported "misrepresentation^]” rather than an "anticompetitive aspect” of Defendants' conduct. Defs.’ Mem. at 33 (quoting In re LIBOR-Based. Fin. Instruments Antitrust Litig. ("LIBOR I"),
. In the FAC, Plaintiffs alleged that "commercial silver traders use the prices of CO-MEX silver futures contracts to calculate the spot market price of silver,” FAC ¶ 122, which appears to be the inverse of the relationship that Plaintiffs now plead. Nonetheless, because Plaintiff have consistently alleged that variations in closing prices for COMEX futures are 99.85% attributable to the Fix Price, FAC ¶ 121, SAC ¶ 114, and that spot prices also closely track the Fix Price, this inconsistency in Plaintiff's pleadings may be not as significant as the Fixing Members urge. Defs.’ Mem. at 10.
„ Plaintiffs’ failure to allege that the Fix Price was the price (or an established component of the price) at which they transacted distinguishes this case from many of Plaintiffs' cited authorities. See Loeb,
. Because most of Plaintiffs' compelling facts, including those based on statistical analyses, are drawn from January 1, 2007 through December 31, 2013, Plaintiffs do not plausibly plead the existence of an antitrust conspiracy prior to 2007 or after 2013. See, e.g., SAC ¶¶ 179-80, 185-97 & Figs. 35-42. Furthermore, the Court has absolutely no basis, apart from conjecture, to assume that Defendants' conduct continued beyond the
. On the other hand, the Court is not persuaded by Plaintiffs’ argument that Defendants stood to benefit from the alleged conspiracy because they held "large, unhedged positions in the precious metals markets.” SAC ¶¶ 208-212 & Figs. 49-51. Based on Plaintiffs’ proffered data, the only bank with a "large unhedged trading position” throughout the Class Period appears to be HSBC, but the supporting data includes all of HSBC’s foreign exchange and precious metals trading, which gives little insight into its position specifically in the silver market. SAC ¶ 208 & Fig. 48. The Bank of Nova Scotia did not take on a large hedging position until 2011, and again, that position reflects its total deriva-fives positions, telling the Court nothing about its position specifically in the silver market. Id. ¶ 209& Fig. 49. Plaintiffs present no comparative data for UBS, id. ¶ 210 & Fig. 50, or Deutsche Bank, id. ¶ 211 & Fig. 51.
. Notably, the Fixing Members acknowledge this point, when it suits their interest, in arguing that Plaintiffs lack CEA standing because Plaintiffs allege a pattern of "isolated (though repeated) manipulative activity” while failing to allege that they transacted at a time during which prices were artificially suppressed. Defs.' Mem. at 44-45.
. Plaintiffs counter that at least some of the expert analyses relied upon were published prior to Plaintiffs’ filing of the initial complaint and therefore were presumably performed independently of any compensated work for Plaintiffs. Pls.’ Opp. at 3. Whether Plaintiffs brought their complaint because of such reports or procured expert analyses after deciding to bring their complaint is immaterial because the Court cannot evaluate the reliability of Plaintiffs’ experts at the pleading stage.
. The Fixing Members cite to Reed Const. Data Inc. v. McGraw-Hill Cos., Inc.,
.The Fixing Members’ argument that Plaintiffs’ experts endorse "obvious alternative explanations” to Plaintiffs' theory is based on a misleading of Plaintiffs’ expert’s report. Defs.’ Mem. at 24-25 (citing Ex. 1 (Caminschi) at 51-52). The report actually concluded that, although fixing results could be "driven by the price changes observed in the public markets,” the "more plausible” theory is that “short-term prices of public traded instruments are driven by the London silver fixing,” i.e., by the Fixing Members. Pls.’ Opp. at 6 (citing Ex. 1 (Caminschi) at 51-52).
. For the reasons stated in footnote 19, supra, Plaintiffs have not plausibly alleged a pattern of price manipulation prior to 2007 or after 2013.
. The Fixing Members’ arguments to the contrary are not so much inaccurate as they are off point. Defs.’ Mem. at 36-37. As described supra the Court agrees that Plaintiffs’ allegations regarding the Defendants’ "large, unhedged positions in the precious metals markets” are not well-pleaded, and even if they were, they would be insufficient to establish a motive for price manipulation under the CEA. See In re Crude Oil Commodity Litig.,
. The Court notes that, in contrast to Plaintiffs’ price manipulation claims, Plaintiffs’ manipulative device claims under Section 6(c)(1) and 17 C.F.R. 180.1 require scienter to be proven by intentional or reckless conduct. See 17 C.F.R. § 180.1(a); Prohibition on Manipulative and Deceptive Devices,
. Finally, the Fixing Members argue that Plaintiffs’ manipulative device claim should be dismissed because it is predicated on an "insider trading” theory but fails to allege that Defendants owed Plaintiffs a fiduciary duty. Defs.’ Mem. at 43 (citing Chiarella v. United States, 445 U.S. 222, 228, 100 S.Ct. 1108,
. The SAC’s relatively thin principal-agent allegations reflect in part the posture of this case. None of the Jane Doe defendants, presumably employees of the Fixing Members, has been identified, and there has been no document discovery. Assuming this case reaches the summary judgment stage. Plaintiffs will be required to adduce significantly more evidence establishing that agents of the Fixing Members violated the CEA and did so acting within the scope of their employment.
. The first Interim Lead Plaintiffs filed a complaint in this action on July 25, 2014. See Complaint, Nicholson v. Bank of Nova Scotia, No. 14-cv-5682 (VEC) (S.D.N.Y. July 25, 2014) (Dkt. 1).
. Defendants argue that Plaintiffs cannot claim ignorance of the alleged manipulation because four of the named Plaintiffs filed class action lawsuits in 2010 and 2011 against HSBC and others for suppressing silver prices. Defs.’ Mem. at 49 n.34. As with the 2008 CFTC investigation, however, those complaints involved substantially different misconduct, which apart from alleging price suppression, had nothing to do with the manipulation of the Silver Fixing alleged here.
. Defendants’ argument that the Plaintiffs were on inquiry notice due to obvious "red flags” regarding the lack of accountability and oversight over the Silver Fixing is misplaced. Defs.' Mem. at 48. Just as these structural factors were not sufficient to constitute "plus factors” in support of Plaintiffs’ con
. Notably, Plaintiffs do not claim to be clients of UBS who suffered losses as a result of UBS front-running their orders or trigger-mg their stop loss orders. See UBS FINMA Report at 12. Rather Plaintiffs allege that they "suffered harm in the sales they conducted on