(Updates with lawsuit claims in fourth paragraph.)
Oct. 17 (Bloomberg) -- Lawsuits filed against 12 banks, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., over claims that they colluded to monopolize the credit-default swaps market, will be consolidated in New York.
The U.S. Judicial Panel on Multidistrict Litigation yesterday joined at least seven cases before U.S. District Judge Denise Cote in Manhattan for pretrial evidence-gathering. Plaintiffs’ lawyers were split between federal courts in Chicago and New York. The companies, which supported centralization, voiced no preference.
The Manhattan-based Southern District of New York “has a strong connection to this litigation, inasmuch as more defendants are based there,” the panel said. “Several events giving rise to the litigation likely occurred there.”
The banks are accused of conspiring to control the market for information about credit-default swaps and their trading, in violation of federal antitrust laws. The banks allegedly sabotaged a CDS exchange planned by the Chicago-based CME Group Inc., leaving market participants with no efficient way to find other non-dealers that wanted to trade the same CDS, according to complaints filed starting in May.
Five suits are pending in federal court in Chicago. Two were filed in Manhattan. Plaintiffs include MF Global Capital, a unit of defunct broker MF Global Inc., and an Ohio pension fund.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decline as investor confidence improves and rise as it deteriorates.
In July, the European Union accused 13 of the world’s biggest banks of colluding to curb competition in the credit derivatives industry. About $30 trillion in swaps are traded annually, according to the complaints.
The banks sued are Citigroup Inc., Bank of America Corp., Barclays Plc, Deutsche Bank AG, BNP Paribas SA, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Credit Suisse Group AG, Morgan Stanley and UBS AG.
Also named as defendants are the International Swaps and Derivatives Association, a trade group representing participants in the over-the-counter derivatives market; and London-based Markit Group Ltd., a financial-information company partly owned by the defendant banks.
The case is In re Credit Default Swaps Antitrust Litigation, 2476, U.S. Judicial Panel on Multidistrict Litigation (Washington).
--Editors: Peter Blumberg, Michael Hytha