US Court Dismisses Class Action Against JP Morgan Chase For FX Rate Manipulation

Yesterday’s ruling by Senior US Judge Denise Cote to overturn a putative class action case against JP Morgan Chase & Co represents a considerable turn of events in favor of the North American financial giant.

Back in September last year, the State of Louisiana Municipal Police Employee’s Retirement System, the State’s police pension fund referred to by the acronym LAMPERS, filed a class action law suit against JP Morgan Chase in Manhattan District Court in New York City, alleging that it manipulated foreign Exchange trades in order to profit commercially to the tune of several million dollars from the pension fund.

During this period, attorneys acting on behalf of the pension fund stated that the financial institution abused its superior position and disregarded its fiduciary duties by extracting inappropriate fees from its custodial clients, and that rather than disclosing the profits made from FX trading, the bank combined the exchange rate and its profit with the conversion rate that it provided to its clients.

On this basis, it was alleged by the plaintiff that it was impossible for the pension fund administrators to know that JP Morgan Chase was extracting profits from indirect FX trading as well as the actual amount of the profit from such trading that JP Morgan Chase was extracting for its own benefit.

Victory for JP Morgan Chase

In Judge Cote’s 44 page ruling, it was added that LAMPERS claims that it had a reasonable expectation that the bank would not misrepresent the currency rates were implausible.

Judge Cote dismissed the case against JP Morgan Chase explaining that “the bank did not misrepresent the rates for the foreign exchange transactions” during the court hearing.

She continued: “LAMPERS identifies no foundation for its reasonable expectation that, in addition to reporting the charged exchange rate, JP Morgan Chase would also reveal its markup on the indirect FX transactions.”

No Central Location – All Trades Disclosed

According to Judge Cote, “currency trading is a decentralized, over-the-counter market, which means there is no central location for buyers and sellers of currencies to do business. There is nothing secret about these particular markups, because JP Morgan Chase disclosed them in public databases as well as on trade confirmations”.

“The relationship of a custodial bank to its client is one of a depositor to its customer, a relation that does not, without more, give rise to fiduciary duty” ruled Judge Cote.

The judge also found that the “conclusory allegation that the bank had substantial discretion in connection with clients’ assets is also unsupported by factual allegations”.

Subsequent to the ruling, a jubilant JP Morgan spokesman stated publicly: “We are gratified by the court’s decision and believe it vindicates our position and our business. The opinion speaks for itself and we have no further comment”.

Conversely, Attorney John C. Browne, acting on behalf of the plaintiff, has thus far declined comment.

This is the second law suit on the same grounds that has been dismissed from court this week. A day previous, Senior US District Judge Lewis A. Kaplan tossed a shareholder derivative suit out of court in a multidistrict litigation accusing BNY Mellon Corporation of manipulating FX transactions, ruling that the complaint failed to demonstrate the bank’s executives knew of and allowed the alleged manipulation.