Three banks accused in price-fixing silver scandal

Deutsche Bank, HSBC and Bank of Nova Scotia illegally rigged the price of silver for their own gain, it has been alleged.

A suit filed by investor J Scott Nicholson claims that the banks broke anti-trust laws and the Commodity Exchange Act by manipulating the daily silver benchmark, reaping the rewards at the expense of investors in the $5 trillion silver market. The benchmarks are used by everyone who trades in silver, forming the basis of billions of dollars’ worth of transactions.

All three banks have previously been taken to court over accusations that they fixed gold prices, whilst in the UK, fellow banking giant Barclays was fined £26m for an attempted price fix earlier this year.  But, following a five year investigation, the US Commodity Futures Trading Commission was unable to find any evidence that the banks rigged the price of silver. The current pricing system, which has been in place for 117 years, is set to change next month when the London Silver Market Fixing Ltd will stop administering the benchmark.

The extreme level of secrecy creates an environment that is ripe for manipulation,” said Nicholson, who hopes to represent a class of investors who have purchased silver futures contracts since 1st January 2007. “Defendants have a strong financial incentive to establish positions in both physical silver and silver derivatives prior to the public release of silver fixing results, allowing them to reap large, illegitimate profits,” he added.

HSBC and Deutsche bank have so far declined to comment, but Diane Flanagan, a spokesperson for Bank of Nova Scotia, told Bloomberg: “We intend to vigorously defend ourselves against this suit.”