LIBOR Scandal

Judge Refuses to Overturn Conviction of UK Traders for Rigging Libor

Published on: February 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

U.S. District Judge Jed Rakoff in New York has upheld the guilty convictions of former Rabobank (RABO) traders Anthony Conti and Anthony Allen for wire fraud and conspiracy. They are accused of involvement in the scam to rig the yen Libor rates and the U.S. dollar to benefit Rabobank’s trading positions. In 2014, the Dutch lender settled European and US probes into Libor rigging for $1B.

Allen and Conti, who face up to ten years behind bars, are claiming that they didn’t receive a fair trial because Paul Robson, the federal government’s star witness, read 300 pages of statements that the two British citizens were required to give during a parallel probe in the U.K.

Banks Work To Settle Libor Rigging Probe With Switzerland

Published on: January 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg says that according two sources, at least six banks are working to resolve a Swiss probe into Libor rigging allegations. COMCO, the competition regulator in Switzerland, is reportedly looking to conclude its probe by July. It has been looking into possible collusion by traders to manipulate the London Interbank Offered Rate and the Tibor, Libor’s Japanese counterpart.

While the names of the firms that COMCO hopes to conclude its probe with have not been disclosed, a dozen banks were originally named at the start of its investigation in 2012, including Deutsche Bank (DB), UBS (UBS), HSBC (HSBC), Royal Bank of Scotland Group Plc (RBS), and Credit Suisse (CS). UBS, which is a Swiss bank, was granted limited immunity, however, because it was the first to step forward and assist in the Libor rigging investigation.

The maximum that Comco is allowed to impose in cases like this one is 10% of a Company’s revenue in Switzerland over the past three years in the area under investigation. Already, some of the firms mentioned in this probe have settled investigations with regulators in the U.K. and the U.S. for about $9 billion. And there are other probes still. Comco continues to look into allegations of Forex manipulation.

In other Libor rigging news, two ex-Rabobank (RABO) traders are trying to get a federal judge in the U.S. to toss out their convictions for manipulating the interest benchmark.

Closing Arguments in UK Libor Trial Against Ex-RP Martin, Tullet Prebon, and Icap Brokers

Published on: January 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Wrapping up its case, the UK’s Serious Fraud Office accused former ICAP (IAP) brokers Danny Wilkinson, Darrell Read, and Colin Goodman, ex-Tullet Prebon employee Noel Cryan, and ex-RP Martin brokers Terry Farr and James Gilmour of behaving like a “well-oiled machine” as they allegedly helped former Citi (C) and UBS (UBS) trader Tom Hayes manipulate the London interbank offered rate (Libor). The office’s lawyer said that the six men are guilty of conspiracy to defraud.

In addition to purportedly assisting Hayes to Libor’s yen variant by deceiving clients about the market’s conditions, the men are also accused of trying to convince traders at other banks to submit false Libor rates. The prosecution has said that for the ex-brokers alleged wrongdoing, they received hundreds of thousands of pounds in kickbacks. The SFO said that the former traders agreed to to try to manipulate Libor in return for “wash trades,” which are transactions intended to make it look as if a sale and purchase have happened even though there has been no change in ownership.

All of the men have pleaded not guilty, with five of them maintaining that they were never involved in the Libor rigging scam at all. Ex-RP Martin trader Terry Farr is the only one who has admitted that he tried to help Hayes. However, his defense team argued that Farr was not aware that his actions were wrong because he only had a basic understanding of the finance industry and didn’t understand derivatives. Also, Cryan said that he lied when he told Hayes he was helping him manipulate Libor. He claims that he never actually engaged in the wrongdoing alleged. Hayes, who recently succeeded in getting his 14-year prison sentence reduced to 11 years following an appeal, made over $300M for his former employers by rigging Libor.

Court Refuses to Overturn Criminal Conviction of Ex-UBS/Citigroup Trader

Published on: December 28, 2015 | by Shepherd Smith Edwards & Kantas, LLP

In the U.K., a panel for the Court of Appeal refused to overturn the criminal conviction of ex-UBS (UBS) and Citigroup (C) trader. Tom Hayes is behind bars for conspiring to rig Libor. However, while his conviction will stand, the panel did lower his criminal sentence from 14 years to 11 years, citing his non-managerial role at the two banks and his diagnosis of mild Asperger’s.

Hayes is considered the main leader, spurring dozens of traders to manipulate the London interbank offered rate. However, his lawyers claim that Hayes did not hide his conduct from others at the bank and never considered his actions dishonest. Hayes said that his behavior was common in his industry.

When he voluntarily testified before prosecutors, Hayes admitted to manipulating rates. He also testified against a number of ex-friends and colleagues. Hayes also is facing criminal charges in the U.S.

Libor helps shape the borrowing costs for trillions of dollars in loans. Banks set rates, including Libor, by turning in rates at which they would be willing to lend each other money in different currencies and at different maturities.

Ex-Rabobank Traders on Trial for Libor Rigging in the US

Published on: October 15, 2015 | by Shepherd Smith Edwards & Kantas, LLP

In New York City, the first criminal trial in the US involving traders accused of rigging the London interbank offered rate is underway. Anthony Conti and Anthony Allen, both former Rabobank traders, are accused of conspiring to turn in fraudulent rate reports for Libor to help others make money off the trades.

According to prosecutor Carol Sipperly, from ’06 to ’11 the two men gave Rabobank and themselves “unfair advantage” with their actions. Sipperly cited messages, emails, and testimony from three other ex-Rabobank traders who pleaded guilty to similar criminal charges.

Defense attorneys for Allen and Conti contended that the rate submissions were presented in good faith and that it was the traders who already pleaded guilty who had engaged in wrongdoing. Allen’s lawyer argued that his client never got compensation for the profits made by the other traders.

Libor rates are established daily in London based on submissions made by 16 banks. The four lowest and highest rates are eliminated with the remaining eight averaged. The benchmark that results represents the rates that banks can borrow from each other for specific periods. However, numerous banks, including Barclays (BARC), JPMorgan Chase (JPM) Rabobank, and Citigroup (c) have had to pay billions of dollars to regulators to settle charges of Libor rigging.

Six Ex-Brokers Go to Trial Over Libor Rigging Allegations in London

Published on: October 6, 2015 | by Shepherd Smith Edwards & Kantas, LLP

In London, six ex-brokers accused of helping to rig interest rate benchmarks are now on trial in criminal court. The defendants include ex-ICAP (IAP) employees Darrell Read, Danny Wilkinson, and Colin Goodman, former RP Martin employees James Gilmour and Terry Farr, and ex-Tullet Prebon broker Noel Cryan, who are all charged with conspiring to rig the rates. All of them have pleaded not guilty.

According to prosecutors, the brokers tried to persuade traders at banks to turn in false Libor rates. They are accused of assisting convicted and former Citigroup (C) and UBS (UBS) trader Tom Hayes to rig Libor. Hayes was recently sentenced to fourteen years behind bars. He is appealing his case. The defendants also allegedly helped others to manipulate Libor submissions related to the Japanese yen.

Specifically, Read, Wilkinson, and Goodman are charged with conspiring with ICAP employee Brent Davies, Hayes, and other traders at UBS. The ex- RP Martin employees are charged of conspiring with traders at UBS, Luke Madden at HSBC (HSBC), and Paul Robson at Rabobank to manipulate the rate. Farr is also accused of conspiring with Hayes while at Citigroup. And former Tullet Prebon’s Noel Cryan also allegedly conspired with UBS traders.

Shareholders Can Sue Barclays Over Libor Rigging, Rules Judge

Published on: August 28, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A U.S. Judge says that the shareholder lawsuit suing Barclays PLC (BCS) for inflating its stock price by manipulating the London Interbank Offered Rate can proceed. According to lead plaintiffs, the St. Clair Shores Police & Fire Retirement System in Michigan and the Carpenters Pension Trust Fund of St. Louis, Barclays and several of its ex-officers purposely misrepresented and understated how much it costs to borrow funds by submitting false information about LIBOR during the period running from August 2007 to January 2009. The rigging of LIBOR by Barclays was disclosed in a 2012 settlement with global regulators in which the financial institution agreed to pay a $450 million fine.

LIBOR is the benchmark used by financial institutions to establish interest rates for lending purposes on different kinds of financial transactions. It is also used to set interest rates in trillions of dollars of investments and loans. The benchmark is calculated for ten currencies. Member banks turn in a figure according to an estimate of what rate they would be charged for borrowing money from other banks.

The shareholder plaintiffs claim that during a conference call in 2008, ex-Barclays president Robert Diamond made a misguided statement about LIBOR when he said that the bank was not paying rates that were higher in any currency. They also believe that Barclays misrepresented its financial health during the period at issue while artificially inflating its share price.

Ex-UBS and Citigroup Trader Gets 14 Years in Prison for Libor Rigging

Published on: August 5, 2015 | by Shepherd Smith Edwards & Kantas, LLP

A jury in London has found Tom Hayes, a former trader at Citigroup (C) and UBS (UBS), guilty of multiple counts of conspiring to rig the London interbank offered rate. He was sentenced to 14 years in prison.

Prosecutors accused him of heading up the scam to manipulate the yen Libor. They said that he asked rate setters and traders at UBS and other banks, as well as outside brokers, to manipulate the rate so that his trading positions would benefit. He also is accused of giving brokers incentives to help him get other banks to rig the rate.

Hayes had defended himself, arguing that he acted in line with industry standards and did not think his conduct was improper. He claims that his superiors knew about his activities.

Hayes was considered one of the top traders internationally. He made hundreds of millions of dollars in revenue for UBS by trading interest-rate swaps. After going to Citigroup, he was fired in 2010 for rigging Libor. While he initially denied wrongdoing, he eventually entered into an agreement to plead guilty. As part of that deal he was to testify against alleged co-collaborators.

Britain’s FCA Bans Ex-Rabobank Trader Over Libor Rigging

Published on: July 30, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Britain’s Financial Conduct Authority is banning former Rabobank trader Lee Stewart from the securities industry. Stewart pled guilty to conspiracy to commit wire fraud and bank fraud related to Libor rigging in the United States earlier this year.

The British regulator said that the bar is for a lack of “honesty and integrity.” The FCA said that Stewart took part in the “criminal conspiracy” to manipulate the benchmark rate over an extended period and engaged in “deliberate misconduct.”

The former Rabobank senior derivatives trader admitted to misconduct involving the Dutch lender’s submission of the London interbank offered rate as it was tied to the dollar. Stewart acknowledged that the rigging scam went on for almost five years, from May 2006 to early 2011.

He is one of three ex-employees at the bank to admit wrongdoing involving Libor manipulation. Seven Rabobank employees were charged in the U.S. for the alleged crimes.

Ex-Deutsche Bank Employees May Face Libor Rigging Charges

Published on: July 11, 2015 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg reports that according to sources, the U.S. Department of Justice is getting ready to file securities charges against former employees of Deutsche Bank AG (DB) for manipulating the London interbank offered rate. The government is looking at five ex-traders who may have rigged the U.S. dollar equivalent of the interest-rate benchmark. If the criminal charges do go through these would be the first ones against the German bank’s traders over Libor.

Earlier this year, Deutsche Bank agreed to pay $2.5B to regulators for rigging Libor and other benchmarks: $600M to the New York Department of Financial Services, $775M to the DOJ, $800M to the Commodities Futures Trading Commission, and $340M to the U.K’s Financial Conduct Authority. The latter had doubled its fine because of what it considered the bank’s “slow” and “ineffective response to questions and purportedly “false, inaccurate, or misleading” statement that it made.

The global settlement included a ban against Deutsche Bank’s traders who had engaged in interest rate rigging. The bank’s DB Group Services in the U.K. also pleaded guilty to one count of wire fraud for its involvement in the scam to defraud counterparties to interest rate swaps by manipulating U.S. Dollar LIBOR contributions.