Deutsche Implicates Other Banks in Silver & Gold Scandal Vince Lanci's picture

Deutsche Implicates Other Banks in Silver & Gold Scandal

by Vince Lanci

Dec 8, 2016 9:36 AM

Guilty: Deutsche Bank Implicates UBS, HSBC, Scotia Bank and More

• Deutsche Bank's settlement included correspondence between other banks
• Barclays, UBS, BOA, HSBC, Scotia all involved

Summary

Written by Vince Lanci for Marketslant Deutsche Bank AG's early settlement in the Gold and Silver Rigging trial has provided prosecutors with smoking gun evidence that not only proves their case, but implicates even more banks in the manipulation of Gold and Silver. It also paves the way from where we stand for a RICO case.
UBS Group AG, HSBC Holdings Plc, Bank of Nova Scotia and others are implicated in rigging the Gold and Silver LME markets. The documents show communication between traders in different banks discussing ways to affect the market.

Smoking Guns and Option Manipulation

Here are the messages, courtesy Tyler, the content of which speaks for itself. Note the complete disregard for client trust. And also note the presence of short option risk in the conversation. For decades people laughed when we told them thebanks were "pinning" their short strikes at expiration. Can there be any doubt now?

Note: the rigging also is option portfolio dependent. This opens
the situation up to a whole new class of traders, namely us-Vince




The Plaintiff's Lawyer

"UBS was the third-largest market maker in the silver spot market and could directly influence the prices of silver financial instruments based on the sheer volume of silver it traded. "Conspiring with other large market makers, like Deutsche Bank and HSBC, only increased UBS’s ability to influence the market."

Deutsche Bank's Settlement as Starting Point

In our exclusive
story from October 5th, we outlined the deal DB made and that it would
likely lead ot pain for those not cutting deals:

Deutsche Bank Settles Prior to the Ruling
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. Defendant Deutsche Bank was a LGMF member until
May 2014 when it resigned its seat after trying, but failing, to sell
the seat to another institution in the wake of an investigation by
German regulators into potential manipulation in the precious metals
markets.

Full article HERE

Deutsche Bank's Smoking Gun Emerges

The DB documents provided as part of the settlement show correspondence between UBS and DB traders discussing tactical schemes to rig the market. These included sharing client order books, how to trigger client stop-loss orders on their own books, and the oversimplified but commonly used term "spoofing". Spoofing is essentially bluffed orders with no intention of honoring the bid or offer if called on it.
For our part, we've described how manipulation occurs many times. Lawyers just don't get it until it is staring them in the face. Finally, it is. What was done for years here is repulsive and unconscionable. And it went on for decades because the markets were small enough that "noone cared" and that banks always had "bigger fish to fry". In trading terms, those firms and their "compliance officers" ignored risk that far outstretched their profit potential. Ethics matter folks.

Deutsche Drops Dime on Co-Conspirators

According to plaintiff sources, DB provided written documentation and phone records implicating almost every other bank that touched the precious metals LME Fixing. Bloomberg confirms

BBG- According to the plaintiffs, records surrendered by Deutsche Bank show traders and submitters coordinating trades in advance of a daily phone call, manipulating the spot market for silver, conspiring to fix the spread on silver offered to customers and using illegal strategies to rig prices.

The Original Defendants Need to Make Room

The original accepted defendants were the 5 banks involved in the Precious metals fixes at LME. Deutsche cut a deal first, leaving the final four of Scotia, Barclays, HSBC, and Soc Gen.

1. the five LGMF fixing banks during the Class Period:
   1. The Bank of Nova Scotia ("BNS")
   2. Barclays
   3. Deutsche Bank
   4. HSBC
   5. Société Générale (collectively, the "Fixing Banks").

Note also, the original complaint failed to meet the burden of proof against UBS and they were exonerated. Well, UBS is neck deep now after DB's cooperation.
However, Deutsche bank provided other banks involved not originally on the docket. Further, they provided actual correspondence of not just IF, but HOW they would manipulate prices.

Bigger Complaint to be Filed- Barclays, Standard, BOA and others implicated

Based on the evidence, the plaintiffs now have in our opinion, a RICO case. This is beyond the  Sherman anti-trust case originally filed. Further, there are more co-conspirators than originally implicated. Newly accused firms include: Barclays, BNP, Standard Chartered, and BOA.
It would be easier to list the names of firms that did not participate in the rigging of precious metals markets during the LME fix.
“Plaintiffs are now able to plead with direct, ‘smoking gun’ evidence,’ including secret electronic chats involving silver traders and submitters across a number of financial institutions, a multi-year, well-coordinated and wide-ranging conspiracy to rig the prices,” the plaintiffs said in their filing. The new scheme “far surpasses the conspiracy alleged earlier.”
We could not agree more

The Rabbit Hole Deepens

And the Fix is what we can see and quantify. This speaks to nothing that is done outside of those tiny constrained parameters of the indictments.
The firms will all, no doubt claim they did not know of the activity of rogue traders. To that we say Bull. Internal calls are monitored and recorded, superiors are briefed on risks and anticipated activity going into the fix. No, this should escalate to department heads.
And this is far bigger than the LME fix. As we said before, if these banks can fix LiBOR, the biggest, deepest interest rate market globally, how hard is it to manipulate a market that can be cornered with $100 Billion? How hard is it to manipulate when there are no eyes watching outside the London Fix period? Not hard a tall. The rabbit hole is very deep here.

Lesser Evils Get Ranked- Sacrifices Will be  Made

As we said before, this is far from over. From our previous coverage attempting to "game" next events:

The Prisoner's Dilemma grid will come into play, even if nothing was done wrong. There will be triage as well. Banks are going to Scramble to prevent it from going up the food chain.

1. Contempt over perjury
2. Perjury over fraud/ intent
3. Fine over jail
4. Rogue employee over Ceo scandal

There will be many bodies thrown under busses going forward if these banks are to preserve their executives. We also expect them to somehow redirect the blame to the LME itself. And then we will see infighting like no other. Up until now we've been as dry as we can in reporting. but now, we cannot hide our happiness as these corrupt representatives of a corrupt market structure bet the veil pulled back on their fraud.

Why This is Far from Over

The law operates on facts, not intuition. That means inductive logic, patterns of abuse, and  circumstantial evidence don't prove intent. In manipulation cases, intent is the hardest leg to prove of the 3 legged stool concept in law.Judge Caproni said as much in her decision.   And Deutsche Bank just provided the hardest of all evidence to refute now: Factual proof of conspiracy. Now watch as other banks try to cut deals. And from there, distance themselves from traders and supervisors to protect the corporate heads of these firms. They, in our opinion are all guilty, and have been so for 30 years.

How We Got Here

Read the following to get the whole picture

• EXCLUSIVE:Judge Orders Gold Manipulation Case Valid
• Part 2: How The Gold Manipulation Trial Will Unravel