Global Settlement Reached in Bond Price-Fixing Lawsuit

Remaining 12 banks agree to robust antitrust compliance measures and a $250 million settlement, bringing total recovery to $386.5 million


Harrisburg, PA - Pennsylvania Treasurer Joe Torsella today announced that a Proposed Stipulation of Settlement has been filed to resolve all outstanding claims against all remaining defendant banks in a lawsuit alleging price-fixing of government-sponsored entity (“GSE”) bonds. The case is presently before the U.S. District Judge for the Southern District of New York, Judge Jed. S. Rakoff.


“The allegations in this case were preventable from the start. If the proper safeguards were in place at these banks, we wouldn’t need to be here knocking the door down on behalf of investors who were harmed by the banks’ conduct. In addition to a financial recovery, my focus in this case has been and remains reforming the government-sponsored entity bond market, to which most public investors are exposed, so that this conduct is not only corrected, but that it is prevented. As a result, some of the largest banks in the nation—for the first time—will implement strong antitrust compliance measures to do just that. I’m proud of the progress that has been made so far and will continue to fight against Wall Street manipulation for Pennsylvania taxpayers.”


Pennsylvania Treasurer, Joe Torsella

The remaining defendants will pay $250 million in damages for the benefit of the class. In total, including earlier settlements, the monetary settlement recovery on behalf of the class of investors harmed by the 16 original defendants’ manipulation of the GSE market will be $386.5 million. Assuming class-wide damages of $857 million, the total recovery of $386.5 million represents approximately 58.4% of the 16 defendants’ proportionate share of single damages.


As part of the settlement, all defendant banks have agreed to establish and maintain an effective antitrust compliance program. Each settling bank, to the extent that they are participating in GSE bond market, must:

  • Conduct rigorous employee training;
  • Establish a “culture of compliance” with strong oversight;
  • Dedicate resources for oversight,
  • Ensure consistency with industry best practices via periodic assessment of program by a representative of Pennsylvania Treasury.

The antitrust compliance programs implemented by each bank must be generally consistent with Pennsylvania Treasury’s drafted principles to achieve adequacy in compliance. These principles incorporate the U.S. Department of Justice Antitrust Guidelines, published in July of 2019.


Two years following the final approval of the proposed settlement, each of the banks will meet and confer, at least annually, with representative(s) of Pennsylvania Treasury to confirm the adequacy of the compliance program and consider industry best practices.


Equitable relief of this nature is rarely achieved in civil class action cases.


“Those who invest public dollars are entitled to participate in a market that is truly competitive and free from manipulation. It is my intention to ensure this is less of a hope and more of a certainty in the future.”


Pennsylvania Treasurer, Joe Torsella

By law, many state, county, and municipal governments, school districts and local agencies are restricted to only invest in GSEs or federally-backed bonds. Price manipulation of any kind to this market harms these entities and steals taxpayer dollars.


Treasurer Torsella first filed this lawsuit in March of 2019 against 16 of the nation’s largest banks, for colluding to fix prices of Fannie Mae and Freddie Mac bonds, between 2009 and 2016. Since then, he has been designated as class representative and four of the defendant banks have agreed to settlement terms that include monetary recovery and structural reforms that will prevent anticompetitive conduct in the future.


The suit included evidence of more than a dozen online chatrooms used by traders representing the defendant banks to discuss and agree on artificial prices before bringing the bonds to market.


“The evidence in this case was particularly damning. The brazen attitude exhibited by Wall Street traders toward public institutional buyers of GSE bonds was shocking.”


Pennsylvania Treasurer, Joe Torsella

The suit alleged that the defendant financial institutions—the largest underwriters of Fannie Mae and Freddie Mac bonds—violated federal antitrust law when they exploited their dominant market position and conspired to unlawfully increase prices, overcharging and/or underpaying investors in GSE bond transactions.


Separately, settlement agreements were reached with four of the original 16 defendants: Deustche Bank, First Tennessee Bank, Goldman Sachs and Barclays.


The 12 remaining settling defendants are BNP Paribas; Cantor Fitzgerald; Citigroup Global; Credit Suisse; HSBC; J.P. Morgan; Merrill Lynch, Pierce, Fenner & Smith, Inc.; Morgan Stanley; Nomura Securities; SG Americas; TD Securities; and UBS Securities.

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