Silver Investor Claims Commodities Dealer Manipulated Market
A Canadian man who lost money trading silver futures has filed a federal lawsuit charging that a commodities dealer and others conspired to manipulate the market and drive up prices.
Kerry Seale, a British Columbian, alleged that from Aug. 5 to Jan. 7, Phibro Inc. - Salomon Smith-Barney Inc.’s commodities unit - and others manipulated silver stocks and drove up price 48 percent from $4.32 an ounce to $6.39.
Seale, whose Golden Harvest Co. also is a plaintiff, said silver prices on the New York Mercantile Exchange (Comex) usually track those of gold and copper, which dropped during the same period by as much as 26 percent.
The “defendants have forced silver futures prices to their highest point in almost nine years,” Seale’s lawsuit alleges.
Seale said the price increase caused him and his firm to lose $164,286.50 trading in silver options for December and January. Seale said he also lost an undisclosed amount of money in earlier transactions.
Seale filed suit Tuesday in U.S. District Court in Manhattan. The lawsuit asks for class-action certification to include all others who may have been damaged by the alleged price manipulation. It seeks unspecified damages.
Phibro counsel Michael Young said the company “vigorously rejects and refutes the allegations” and said it is considering filing a counter-suit charging defamation.
The lawsuit came just as the silver market appeared to have regained its confidence that a sharp drop in exchange inventories can be attributed to strong demand in manufacturing, photography and jewelry, analysts said.
Market participants have been speculating for weeks that a group of investors was buying up silver and placing in it in non-exchange monitored warehouses in Europe in a bid to drive prices to $9 an ounce.
Seale alleges that the defendants helped reduce available Comex silver by 90 million ounces - about 45 percent, the smallest inventory in 12 years - by hoarding the metal.
Defendants named by Seale are Phibro Inc. and its subsidiaries Phibro Energy Clearing Inc. and Phibro Bullion Inc., all of Westport, Conn., and John Does 1-10, unknown individuals who allegedly conspired with Phibro.