October 2, 2015

$1.86 Billion Dollar Credit Default Swaps Settlement: One of the Largest Since the Financial Crisis

By the C|C Whistleblower Lawyer Team

Constantine Cannon LLP is pleased to announce a $1.86 billion settlement of In Re:  Credit Default Swaps Antitrust Litigation, a major class action lawsuit. The case alleged that 11 of the world’s largest banks conspired to restrain competition in the credit default (CDS) market.  See yesterday’s Wall Street Journal report.  Constantine Cannon LLP served as one of the counsel for Los Angeles County Employees Retirement Association (“LACERA”) in the In re Credit Default Swaps Antitrust Litigation1:13-MD-02476, pending in the U.S. District Court for the Southern District of New York, Judge Denise Cote presiding. LACERA was appointed one of two co-lead plaintiffs by Judge Cote and the firm’s co-counsel, Pearson, Simon & Warshaw, LLP, serves as co-lead counsel for the plaintiff class.

CDS were at the center of the 2008 financial meltdown and the CDS settlement is one of the largest since the crisis, as reported by the New York Times.

“We are gratified to see the interests of participants in the CDS market – including public pension funds investing on behalf of retirees – vindicated, and competition in this important market fostered,” said Wayne Lamprey, a partner in Constantine Cannon’s San Francisco office.  “Constantine lawyers have a history of success working with public entities in both the whistleblower arena and on antitrust matters.  We expect to see more instances where our expertise in both these areas combine to further the public interest.”

CDS are a form of financial derivative that provides a means to hedge risk associated with debt.  LACERA and the other plaintiffs alleged the defendants conspired to prevent the emergence of exchange trading of CDS, to preserve large margins they received from over-the-counter trades.

According to the plaintiffs, as the CDS market matured, conditions were ripe for the emergence of exchange-based trading but the defendants conspired to scuttle a new platform by collectively refusing to do business with it. Named in the lawsuit were Bank of America, Barclays Bank PLC, BNP Paribas, Citigroup Inc., Credit Suisse AG, Deutsche Bank AG, Goldman Sachs & Co., HSBC Bank Plc, JP Morgan, UBS AG, Royal Bank of Scotland PL, the International Swaps and Derivatives Association (ISDA) and Markit Group Ltd. At an earlier conference with the court, the parties announced that a settlement was in the works.  On September 25, the parties advised the court they had reached agreement.  The court will now hold hearings to determine whether to approve the settlement.

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