Settlement Agreement with Deutsche Bank Submitted in Alleged Bond Manipulation Case

Deutsche Bank becomes first defendant to agree to payment and remediation measures as part of settlement agreement


Harrisburg, PA - Pennsylvania Treasurer Joe Torsella today announced that a settlement agreement with Deutsche Bank, the first defendant in a lawsuit alleging price-fixing of government-sponsored entity (“GSE”) bonds, has been submitted for approval to the United States District Court in the Southern District of New York. As part of the settlement, Deutsche Bank has agreed to a $15 million payment and to maintain a multi-factor antitrust compliance program to prevent and detect anticompetitive conduct relating to GSE bonds.


“This agreement is an important first step, but just a first step, toward greater accountability on Wall Street. Government-sponsored entity bonds are foundational to public investment portfolios, particularly for state governments, school districts, county governments and local municipalities. When taxpayer dollars are at stake, I will always fight to make sure this type of conduct is not only corrected, but prevented. In addition to obtaining a financial recovery, my focus in this lawsuit is to ensure that necessary reforms are made to ensure compliance with antitrust laws, on behalf of the class.”


Pennsylvania Treasurer, Joe Torsella

A central feature of the settlement is Deutsche Bank’s agreement to maintain, so long as it engages in the GSE market, a robust compliance program designed to prevent and detect anticompetitive conduct that specifically includes:


  • rigorous employee and management training;
  • organizational commitment to culture of ethical conduct;
  • internal oversight and auditing of employee communications;
  • a dedicated and experienced full-time legal compliance team; and
  • an ongoing internal/external risk assessment to ensure consistency with industry best practice.

In addition, Deutsche Bank has agreed to meet and confer with the Pennsylvania Treasury on a semi-annual basis to discuss the bank’s ongoing antitrust compliance policies, procedure, and controls applicable to the GSE bond market.


The amended complaint adds more than a dozen examples of what Judge Rakoff called “rare smoking gun” evidence: chatroom transcripts that “unmistakably show traders, acting on behalf of those defendants, agreeing to fix prices at a specific level before bringing the bonds to” market. In re GSE Bonds Antitrust Litig., 2019 WL 4071070, at *5 (S.D.N.Y. Aug. 29, 2019).


“Typically, class action cases that involve financial wrongdoing end in a settlement payment. That’s important, but that’s not enough. Reforms, like the ones agreed to today, is necessary to restore public confidence in the market’s integrity by ensuring anticompetitive conduct is prevented at its source.”


Pennsylvania Treasurer, Joe Torsella

The financial settlement of $15 million, for the benefit of the class, reflects Deutsche Bank’s early cooperation in this suit.


The suit alleges that the defendant financial institutions—the largest underwriters of Fannie Mae and Freddie Mac bonds—violated federal antitrust law when they exploited their dominant market position and conspired to unlawfully increase prices, overcharging and/or underpaying investors in Fannie Mae and Freddie Mac bond transactions between 2009 and 2016.


The Commonwealth of Pennsylvania entered thousands of transactions in GSE bonds directly with the named defendants while the alleged price-fixing conspiracy was in effect. Federal government sponsored securities, such as Fannie Mae and Freddie Mac bonds serve as foundational investments for public agencies seeking highly rated investments in which to place public funds.


The State Treasurer is legal custodian of all Commonwealth funds, which exceed $110 billion.

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