German banking giant, Deutsche Bank AG (USA) (NYSE:DB), has agreed to pay $38 million to settle its US silver price-fixing case. It was alleged that the bank illegally worked with some of its peers to fix silver prices. According to papers filed in court on Monday, the bank was able to profit at the expense of its investors by fixing the rate.
The settlement was made in Manhattan federal court and is amongst several lawsuits in which investors accused banks of conspiring to rig prices and rates in financial and commodities markets. This settlement had been widely anticipated in the market since April this year; now the terms of the settlement have also been disclosed. It is expected that this deal will ease off some tension between other banks and investors who are entangled in similar cases. It will also give a push to other banks to settle similar issues.
A lawyer for the investors, Vincent Briganti, said that the deal provided "substantial monetary compensation plus cooperation from Deutsche Bank in the continued prosecution of this important case against the non-settling defendants." However, court approval is still required to finalize this settlement.
Other banks accused of rigging silver prices in the same case were HSBC Holdings Plc and Bank of Nova Scotia, also known as ScotiaBank. Investors have accused them of running this operation through a secret daily meeting called the Silver Fix. They have also accused Swiss banking giant, UBS AG, of benefitting from that fix. These investors have stated that the conspiracy started back in 1999 when around $30 billion worth of silver and silver financial instruments were traded every year on rigged prices. Those trades allowed the accused banks to secure returns which were more than 100% on an annualized basis.
US District Judge Valerie Caproni dismissed UBS from the case stating that there was no proof against the bank showing that it manipulated the prices (even if it pocketed gains from the distorted prices). The judge ruled that Deutsche Bank, HSBC and ScotiaBank violated the antitrust law in US as they conspired to fix silver prices from 2007 to 2013.