Labaton Sucharow Files Class Action Alleging Price Manipulation of Fannie Mae and Freddie Mac Bonds

by Labaton Sucharow

April 10, 2019

Labaton Sucharow on behalf of Oklahoma Police Pension and Retirement System has filed an antitrust class action complaint alleging that certain banks entered into an unlawful conspiracy to fix prices in the $550 billion market for corporate bonds issued by Fannie Mae and Freddie Mac.

According to the complaint, defendants – including Deutsche Bank, Goldman Sachs, JP Morgan, and Citigroup – are the largest players in the primary market for Fannie and Freddie bonds, which allowed them to control the supply of these bonds available to investors in the post-issuance, secondary market. Defendants’ exploited that control by agreeing (1) to charge artificially inflated prices for newly issued bonds during the week following a new issuance; (2) to inflate the prices of older bonds in the days prior to each new bond issuance; and (3) to widen the bid-ask spreads they quoted to customers, causing investors to pay more for Fannie and Freddie bonds and receive less money on sales.

The complaint alleges that defendants orchestrated and maintained their conspiracy for more than five years, using secretive communications to discuss proprietary customer information and agreed upon the prices that they would quote to investors. As reported in Bloomberg in June 2018, the U.S. Department of Justice Antitrust Division is currently investigating the alleged misconduct as well.

The Labaton Sucharow team is led by Antitrust and Competition Litigation Practice Co-Chairs Gregory Asciolla and Jay Himes, and included partners Karin Garvey and Christopher McDonald, and of counsel Robin van der Meulen and Matthew Perez.

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