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Goldman, State Street Face Antitrust Claims Over Currenex (1)

Aug. 5, 2021, 3:01 PM; Updated: Aug. 5, 2021, 4:58 PM

Goldman Sachs & Co. and State Street Bank & Trust Co. were hit with federal antitrust claims in Manhattan over an alleged scheme to rig foreign currency transactions through Currenex Inc., a State Street affiliate that operates a leading exchange platform.

The proposed class action accuses Currenex of fraudulently telling traders its software relied on the industry-standard “first in, first out” system for matching “bids” and “asks,” when in fact it gave State Street and Goldman the ability to “jump in line” and cancel transactions at the last second.

“Instead of operating a true FIFO order book, Currenex operated a rigged auction,” the complaint says. “With these secret agreements in place, the trading defendants’ incentive to compete for trades was suppressed or removed entirely. As a result, prices and spreads on Currenex became artificial.”

The lawsuit, filed late Wednesday in the U.S. District Court for the Southern District of New York, also targets private equity firm HC Technologies LLC and several unidentified “Doe” defendants. In addition to antitrust violations, it alleges fraud and racketeering.

Representatives for Goldman, State Street, and HCT declined to comment Thursday.

Currenex—which State Street acquired in 2007 for $564 million—"was motivated to abandon ‘first in, first out’ to bribe important clientele and funnel money to its corporate parent,” according to the complaint.

From the platform’s perspective, the purpose of manipulating transactions was both to raise trading volume and to increase profits flowing to State Street, which “was not only aware of the fraudulent scheme” but “deliberately used and supported Currenex in order to further” it, the lawsuit alleges.

HC Technologies allegedly became a co-conspirator thanks to the “cozy relationship” between Currenex and senior HCT executives who had previously worked there, the complaint says. And Goldman was a “natural participant” in the scheme because of its enormous trading volume, according to the complaint.

The benefits to them were “obvious,” the lawsuit says: “They could reap supra-competitive profits merely by matching the quotes from others, and then canceling trades they ended up not liking.”

Cause of Action: Section 1 of the Sherman Act; the Racketeer Influenced and Corrupt Organizations Act; fraud; unjust enrichment; aiding and abetting.

Relief: Treble damages, an injunction, costs, fees, and interest.

Potential Class Size: Anyone—except government agencies and Currenex affiliates—who has executed a trade on the platform since 2005.

Attorneys: The plaintiffs, Edmar Financial Co. and Irish Blue & Gold Inc., are represented by Quinn Emanuel Urquhart & Sullivan LLP and Ruddy Gregory PLLC.

The case is Edmar Fin. Co. v. Currenex Inc., S.D.N.Y., No. 21-cv-6598, complaint filed 8/4/21.

(Updates fifth paragraph to indicate State Street declined to comment.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com

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