Barrick Gold Corporation

Green & Noblin, P.C., has filed a lawsuit on behalf of all purchasers and/or sellers of gold futures and option contracts on the COMEX. The complaint alleges that Barrick Gold Corporation and JP Morgan combined to manipulate the price of gold, attempted to monopolize the spot gold market, and have restrained trade in that market, primarily through the use of gold derivatives, physical sales of gold on the spot gold market, and public misrepresentations.

Plaintiffs allege that as a part of Barrick Gold’s Premium Gold Sales Program, Barrick and JP Morgan collaborated to create spot deferred sales contracts. Under the contracts, JP Morgan borrows gold from a central bank. JP Morgan, on Barrick’s behalf, then sells the gold into the spot market, creating an obligation on the part of Barrick to repay the gold loan in the future. JP Morgan invests the proceeds from the sale into financial instruments that provide a rate of return greater than the lease rate to be paid by Barrick on the gold. Finally, Barrick is required to deliver gold, in the amount borrowed, to JP Morgan. Yet, under the terms negotiated between Barrick and JP Morgan, Barrick can defer repayment of the borrowed gold for fifteen years and Barrick is not subject to margin calls by JP Morgan. Barrick receives the proceeds from the sale on the spot market and the interest that accrued on that transaction. When gold prices rise, Barrick can postpone repayment of the borrowed gold, sell its gold production into the market at the higher spot price, and repay the gold to JP Morgan when the spot price falls to levels that make repayment profitable for Barrick.

In addition, Barrick is alleged to have manipulated the market through direct and indirect misrepresentations. Plaintiffs allege Barrick has falsely stated that it was reducing its hedge position while in reality Barrick increased its hedge position.

If you purchased gold futures and option contracts on the COMEX, and want more information about this lawsuit, please contact us at gn@classcounsel.com or (415) 477-6700.