The London Metal Exchange is being sued for £363million by one of the world’s most feared hedge funds.
The LME was hit with the lawsuit by Elliott Management over a debacle involving nickel trading earlier this year.
It comes as another blow to the reputation of the 145-year-old exchange, which has faced a fierce backlash since cancelling nickel deals as the price surged.
Lawsuit: The London Metal Exchange, one of the City’s oldest institutions, has faced a fierce backlash since cancelling a slew of nickel deals as the price surged
Hedge funds and other City firms that stood to benefit from the rising price lost out when their trades were erased on March 8.
At the same time, the intervention limited the losses suffered by Tsingshan Holding Group, a Chinese nickel producer accused of being an LME ‘crony’ that was betting on the price falling.
The LME, which is owned by Hong Kong Exchanges and Clearing (HKEX), was blasted by the International Monetary Fund (IMF) over the ‘nickel pickle’.
The watchdog hit out at the LME for harbouring a ‘conflict of interest’ and potentially affecting ‘free and fair markets’.
British regulators at the Financial Conduct Authority and the Bank of England have also launched a review into the ‘disorderly market’ in nickel trades.
Florida-based Elliott claims the cancellation of trades was ‘unlawful on public law grounds and/or constituted a violation of the claimants’ human rights’.
Elliott is asking a High Court judge to review LME decisions, and assess whether it broke the law.
It says LME exceeded its powers when it cancelled trades, or exercised the powers that it did have unreasonably and irrationally.
HKEX said it believed the claim was ‘without merit and the LME will contest it vigorously’. It added that it had ‘always acted in the interests of the market as a whole’.
But Elliott is ruthless. It has battled drugs giant GSK, housebuilder Taylor Wimpey, investment group Alliance Trust, miner BHP and Whitbread, among others.
Founded by US billionaire Paul Singer, and overseen by his son Gordon in the UK, it won infamy for buying Argentinian debt which the country struggled to repay, and tried to seize a naval ship to force repayment, before settling in 2016.