HSBC Dropped From Lawsuit on Silver-Price Manipulation
The amended lawsuit, filed by individual silver investors, names J.P. Morgan Chase & Co. as the sole defendant. The lawsuit alleges the bank amassed an unfairly large position in silver futures and then used its position to drive down prices of silver and increase its own profits.
A J.P. Morgan spokesman declined to comment.
HSBC had been named by individual silver investors in the original lawsuit filed last year, but the amended complaint, filed Tuesday in federal court in Manhattan, doesn't name the London bank.
Instead, the filing said HSBC and the investors have entered what is known as a tolling agreement, which stops the statute-of-limitation clock for the plaintiffs.
A tolling agreement is often used so the sides can attempt to negotiate a settlement, but if talks fall apart it still leaves the plaintiffs enough time to file a new complaint.
A spokesman for HSBC acknowledged that the filing cited a tolling agreement but declined to comment on it.
The spokesman said any settlement discussions would be confidential. He said HSBC intends to "continue to vigorously defend" itself.
A lawyer for the investors wasn't immediately available for comment.
The lawsuit still contains allegations that J.P. Morgan traders were in contact with HSBC traders.
The original lawsuit alleged both banks accumulated massive short positions on silver futures, essentially betting that the price of silver would fall dramatically. Because they held such large positions, the initial complaint alleged, the banks were able to send orders into the market that caused turmoil and benefitted the short position. The alleged manipulation occurred between 2008 and 2010, the lawsuit said.
In the amended suit, J.P. Morgan is accused of the manipulation. The lawsuit said regulatory data show HSBC was the only other U.S. bank that likely held a consistent short position in silver from 2008 to 2010, though it said HSBC had a much smaller position than J.P. Morgan.
The amended filing alleges J.P. Morgan caused silver prices to fall 12% in one day, thereby by driving up the value of its short position by $220 million.
The lawsuit also continues to allege that three traders who initially worked together at HSBC remained in close contact even after two of them moved to J.P. Morgan.
Source: WSJ.com