U.S. judge questions Treasury auction manipulation case's strength

By Nate Raymond

NEW YORK, Aug 22 (Reuters) - A U.S (Other OTC: UBGXF - news) . judge expressed concern on Monday about whether a series of lawsuits accusing various banks and brokerages of conspiring to manipulate Treasury auctions could avoid dismissal.

U.S. District Judge Paul Gardephe in Manhattan (Hamburg: 32U.HM - news) cited a July letter by lawyers for Goldman Sachs Group Inc, Morgan Stanley and Deutsche Bank AG (LSE: 0H7D.L - news) laying out the potential defenses they and other defendants planned.

"I do have some concerns about whether the complaints as currently drafted make out a plausible case of collusive or manipulative conduct," Gardephe said at a court hearing.

The Treasuries class action lawsuits allege that the banks colluded to manipulate Treasury Department auctions and the pricing of Treasury securities, as well as derivative products such as futures, whose value is pegged to the Treasury.

In particular, they allege manipulation in the so-called "when-issued market" - or the period between when the auction date is announced and the auctioned securities are delivered.

Douglas Richards, a lawyer with Cohen Milstein Sellers & Toll, one of the law firms appointed temporary lead counsel, declined to comment. Goldman and Morgan Stanley (Xetra: 885836 - news) also declined to comment, while Deutsche Bank did not immediately respond to a request for comment.

Gardephe's remarks came at an early stage in the litigation, before the plaintiffs had even filed any amended complaints that would consolidate their various claims in the 45 lawsuits currently before him.

It was the first hearing since a federal panel that is responsible for consolidating related lawsuits in December put Gardephe in charge of overseeing various lawsuits alleging banks had manipulated Treasury auctions.

The lawsuits, first filed in July 2015, target 26 financial institutions that have served as primary dealers in the government debt marketplace. The lawsuits state claims for antitrust and Commodity Exchange Act violations.

The litigation came as the U.S. Justice Department began a probe of potential misconduct by the banks in the Treasuries markets, after earlier investigations on the manipulation of Libor interest benchmark rates and foreign exchange rates.

Those probes resulted in some banks paying billions of dollars in criminal and civil penalties.

The case is In re: Treasuries Securities Auction Antitrust Litigation, U.S. District Court, Southern District of New York, No. 15-md-2673. (Reporting by Nate Raymond in New York; Editing by Dan Grebler)