In re Treasury Securities Auction Antitrust Litigation

Updated: November 02, 2015
Status: Ongoing Case

22 prominent financial institutions allegedly participated in pervasive collusion


On July 23, 2015, Labaton Sucharow filed the first nationwide class action on behalf of State-Boston Retirement System, alleging a conspiracy by prominent financial institutions, including Goldman Sachs, Citigroup, Credit Suisse, Deutsche Bank, Merrill Lynch, and JPMorgan, among others, to manipulate auctions for U.S. treasury bills, notes, and bonds (treasury securities). On July 24, 2015, Labaton Sucharow filed a similar complaint on behalf of Arkansas Teacher Retirement System.

Treasury securities—debt instruments issued by the U.S. Treasury Department—are not only used to help finance U.S. government operations, but are also used by state and local municipalities, corporations, investment funds, hedge funds, pension funds, and individuals for investing and hedging purposes. Interest rates set by auctions for treasury securities are also used as benchmarks for many other types of debt and debt-related instruments, including student loan debt, bonds, interest rate swaps, and exchange-traded treasury futures and options.

The plaintiff claims that the defendants employed a multi-pronged scheme to effectively "sell high and buy low," colluding to induce investors to pay high prices for debt securities purchased from defendants in the pre-auction market, called the "when issued market," and to depress the price of the securities that the defendants themselves bought at auction to cover these sales, pocketing the difference.

According to the complaints, the defendants manipulated the treasury securities market by using chat rooms, instant messaging, and other methods to exchange confidential customer information and coordinate trading strategies.

"The defendants' scheme struck at the heart of the U.S. economy: the ability of the government to efficiently raise capital via Treasury auctions," said partner Michael W. Stocker. "This collusion not only robbed investors participating in the 'when issued' market for these auction securities, but imposed billions in additional costs on borrowers ranging from students to municipalities."

Proceedings before the Judicial Panel on Multidistrict Litigation began in September 2015, resulting in transfer of the cases to The Southern District of New York for coordinated or consolidated pretrial proceedings in December 2015.

The case is In re Treasury Securities Auction Antitrust Litigation, No. 1:15-md-02673 (S.D.N.Y). The plaintiffs are Boston Retirement System and Arkansas Teacher Retirement System.