TORONTO — Bank of Nova Scotia, along with a handful of international banks embroiled in a lawsuit in the United States over alleged manipulation of a key benchmark based on the gold price, is facing a fresh lawsuit filed in Canada.
Lawyers at Sotos LLP, Koskie Minsky LLP and Camp Fiorante Matthews Mogerman are seeking class action status for the lawsuit filed in the Ontario Superior Court of Justice.
In a statement Tuesday, the law firms said they are seeking up to $1 billion in damages or compensation on behalf of Canadian investors who bought “a gold market instrument either directly or indirectly” between Jan. 1, 2004, and March 19, 2014.
The lawsuit alleges the defendants, including Bank of Nova Scotia, “conspired to manipulate prices in the gold market under the guise of the benchmark fixing process, known as the London PM Fixing, for a ten-year period, ” the law firms said in the statement.
“It is further alleged that the defendants manipulated the bid-ask spreads of gold market instruments throughout the trading day in order to enhance their profits at the expense of the class.”
None of the allegations has been proven, and the case cannot move forward as a class action unless certified by a court.
“We believe that this matter has no merit and will defend ourselves vigorously, ” a spokesperson for the Bank of Nova Scotia said in an emailed statement. “As this matter is before the courts we are unable to comment further.”
Scotia is also among a handful of financial institutions including Barclays PLC and Deutsche Bank AG named in a lawsuit filed in New York last year, which alleges five banks overseeing the setting of a century-old benchmark known as the London gold fix colluded to manipulate it.
Kirk Baert, a partner at Koskie Minsky who is involved in the recently filed Canadian lawsuit, said he believes it is the first case in this country to make claims against banks involved in the setting of the gold price and benchmarks.
“It’s the first I know of, ” Baert said, adding that the case contains “very troubling allegations.”
Scotia became a large player in the gold market in late 1997 with the purchase of the precious metals business of Standard Chartered Bank. That deal transformed Scotia from the biggest Canadian precious metals player to a global force, and landed the Canadian bank a seat at the table for the prestigious London gold fixing, a twice-daily auction that served as a pricing mechanism for the precious metal.
Scotiabank’s gold division, Scotia Mocatta, as well as parent company Bank of Nova Scotia and Scotia Capital (USA) Inc. are named in the notice of action filed in connection with the Canadian lawsuit.
Barclays Bank, Deutsche Bank Securities, SBC Securities, Société Générale, and UBS AG are also name as defendants.
Since the financial crisis of 2008, regulators have probed the price-setting mechanisms of a number of key benchmarks, including an interest rate benchmark known as LIBOR.
According to Tuesday’s statement from the law firms behind the latest lawsuit involving the gold benchmark, the United States Department of Justice is in the midst of an “active and ongoing” investigation of the price-setting practices, and the Commodity Futures Trading Commission is also investigating.
“Other law enforcement and regulatory authorities in the United States, Switzerland, and the United Kingdom have active investigations into the defendants’ conduct in the gold market, ” the statement from the law firms said.
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