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Defense Against Allegations of Market Manipulation

Brattle assists clients with defending against government investigations and enforcement actions based on allegedly manipulative behavior. We enable clients and their counsel to quickly assess whether such actions are groundless or have merit and can assist with deposition preparation and discovery. If potentially manipulative behavior is found, we assist in determining the optimal posture for settlement such that exposure to civil penalties, damages, and potential criminal liability is minimized. Should litigation arise, our staff and experts assist counsel by developing logically-consistent economic analyses to complement and strengthen the legal arguments made, and by providing the expert testimony and litigation support required to strengthen the client’s defense.


Below is a list of representative engagements for our Defense Against Allegations of Market Manipulation practice.

LIBOR benchmark manipulation litigation
The Brattle Group is providing economic analysis in connection with class action litigation, and supporting academic economists in developing expert opinions concerning the effects of alleged LIBOR benchmark manipulation.
Support of client under investigation
The Brattle Group assisted a commodity trader’s preparation for deposition pursuant to an investigation for alleged manipulative activity. Using market data, the client’s trading book, documents provided by the government, and objective data including IMs, emails, and public data surrounding the suspected trade events, The Brattle Group evaluated the government’s likely “best case” that could be brought against the trader, as well as potential “best responses” the trader would have to refute the causal elements necessary to prove manipulative intent.
Assisting internal investigation
Brattle is assisting a client concerned that various trades placed over time could be questioned as “uneconomic” and thus fraudulent under the agencies’ market manipulation rules. These transactions may have led to various financial benefits and/or out-of-market payments that could be alleged as potential manipulation targets. The analysis is evaluating trading data to determine whether intentionally uneconomic trades were in fact placed into the market and, if so, whether those trades distorted market outcomes. This analysis will provide the client and its counsel with an understanding of the agency’s potential “best case” and the associated potential liability involved.
Agency self‐report
We successfully assisted a major financial trading organization in preparing and submitting a self‐report concerning legitimate trading behavior that might have been misconstrued as manipulative. The analysis provided was consistent with the logic of the analytic framework developed and extensively published by Brattle’s market manipulation defense team. The agency decided to take no action against the market participant in this case.
EC investigation of alleged collusion and exclusionary conduct in CDS trading
During 2012-2013, Brattle was retained by a global investment bank as part of an European Commission (EC) investigation brought against twelve dealer banks regarding alleged collusion and exclusionary conduct in the global market for trading credit default swaps (CDS). We were retained to evaluate the maturity and liquidity of the CDS market to determine its preparedness for migration from OTC to a liquid all-to-all (CLOB) exchange-based trading platform. We also evaluated the EC hypothesis that bid-ask spreads would have been narrower under exchange-based trading.
Analysis of alleged FX Standing Instruction misstatements
In a case involving best execution of FX trades, The Brattle Group analyzed whether a major U.S. bank fraudulently misled customers in its Standing Instruction (SI) program and wrongfully profited based on the spread between the pricing terms represented to SI customers and the prices at which the bank actually executed SI trades. Brattle consultants assisted the trial team in all aspects of fact discovery, including extensive data analysis and large-scale document review to inform case theory, identify and prioritize witnesses, and help develop targeted case-specific information. In a separate engagement, Brattle also worked on the damages issues resulting from the alleged misrepresentations.
Best execution of paired FX forwards
The Brattle Group consulted on two cases involving a series of highly-structured paired FX forward contracts (Nevada Partners Fund, et. al v. U.S. and Kearney Partners Fund, et al v. U.S.). We analyzed the profit potential and investment risk in the FX trades relative to typical FX pricing, information, risk, and best execution. We also analyzed how the FX trades were executed and documented relative to standard banking practices for such trades, including the internal evaluation and approval of the trades, their structure, and the fee/pricing arrangements. In both cases, our work was used by the trial team to inform its case from the start of fact discovery through trial. In separate engagements, Brattle identified and worked with industry experts to develop testimony on the fundamentals of the underlying FX trades relative to similar market trades, the execution of the trades by the bank relative to industry customs and practices, and the trades’ profit potential.
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