http://www.theaustralian.com.au/business/mini...hesis-stirs-...
PERTH, Australia -- An Australian academic's discovery of global gold
price collusion has sparked a looming US trial in which four of the world's
major banks are being sued for up to $1 billion over claims they rigged the
price of the precious metal at the expense of investors over a decade.
Perth-based Andrew Caminschi can be revealed as the academic who
unwittingly exposed a scandal during a painstaking study of tens of millions
of gold transactions that took him 18 months.
"It was needle in the haystack-type stuff," Associate Professor
Caminschi said yesterday of the anomalies he discovered in the data.
"But once we found it, it was pretty damning."
In a key development, a US judge ruled last week that the four banks --
Barclays, Bank of Nova Scotia, HSBC and Societe Generale -- had a case to
answer and that a lawsuit filed by investors would proceed to trial.
Germany's Deutsche Bank was also accused of manipulation but settled its
case in April and has agreed to help the plaintiffs in their claims against
the remaining defendants.
Assistant Professor Caminschi, 42, said he would act as an expert consultant
at the trial in New York and admitted he was surprised his otherwise obscure
PhD thesis at the University of Western Australia -- for which he had to
build his own server -- had damaged the banks and led to a shake-up of the
century-old gold pricing system.
"I never thought it would get to this," he said. "I didn't
go out cartel-busting or bank-bashing -- it was more like the data was just
yelling at me."
During his research, the academic discovered apparent manipulation
during the twice-daily meetings held by banks in London that determined the
benchmark price of gold, which was then used by dealers, central banks and
mining companies to trade the precious metal.
The analysis of 14 years of raw data found that during these meetings, and
before the benchmark price became known, trading volumes in gold derivatives
would rise substantially. This suggested the banks were trading on, and
potentially profiting from, information that was not available to the wider
market -- a theory that had been rumoured for years but never proven.
"I went into my supervisor's office and I had this heat map and there
was a thin white line which runs through the heat map which symbolised areas
of very, very intense trading," Associate Professor Caminschi recalled.
"We were only expecting to see that white line when the news came
out, when people would adjust their positions based on the news.
"When I showed it to my supervisor, and after I explained it, he
said, ‘Oh shit'."
The research was first published in an academic journal in 2013.
It was later picked up by industry publications and financial news
provider Bloomberg, sparking attention from regulators and leading to scores
of lawsuits.
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