Deutsche Bank AG (DB) has settled with 45 US states and will now pay $220M to resolve allegations that it engaged in rigging the London Interbank Offered (LIBOR) rate and other benchmark interest rates. According to the settlement, the bank admitted that its managers and traders took part in benchmark rigging from ’05 to ’09.
A press release issued by New York Attorney General Eric Schneiderman states that Deutsche Bank “acted unlawfully,” including that:
· The bank defrauded counterparties when it didn’t disclose that it was making LIBOR submissions that were “false or misleading.”
· Its traders tried to influence the LIBOR submissions of other banks so that Deutsche Bank would benefit.
· The bank knew that other banks were rigging LIBOR, too.
· Deutsche Bank didn’t disclose that the other banks’ LIBOR submissions were not accurate reflections of their borrowing rates or that the published rates were not accurate to the submitting banks’ real borrowing costs.
Local and state government entities, as well as nonprofits and private entities, engage in transactions involving different kinds of financial instruments that relate to LIBOR, including: collateralized debt obligations (CDOs), swaps, forward rate agreements, floating rate notes, asset-backed securities, structured notes, options, and variable rate bonds.The NY AG’s office said that the nonprofits and government entities that were affected by the LIBOR rigging did not know that the banks were manipulating the key benchmark when they went into financial contracts with Deutsche Bank, and they were defrauded of millions of dollars.
Previously, Deutsche Bank had agreed to pay $2.5B in disgorgements and penalties to settle UK and US probes into benchmark interest rate rigging. Earlier this year, it consented to pay $77M to settle US investor fraud lawsuits over Yen-Libor rigging. In 2015, DB Group Services (UK) Limited, a Deutsche Bank subsidiary, pleaded guilty to wire fraud involving LIBOR rigging. The bank and the subsidiary agreed to pay $775M in criminal penalties to the DOJ.
Since about 1986, LIBOR has been utilized as a benchmark interest rate in financial markets around the world. Many derivative financial instruments that are traded on exchange and over-the-counter markets are often determined using LIBOR. Consumer lending products, including student loans, credit cards, and mortgage rates, will frequently reference Libor, as do settlements of interest rate futures and options contracts on the futures and options exchanges. From ’05-’10, the 16 banks that made the USD LIBOR submissions, which were meant to reflect interbank market borrowing rates, manipulated the benchmark to their benefit.
Deutsche Bank is not the only bank to settle with US states over LIBOR manipulation. Last year, Barclays (BARC) said it would pay $100M to 43 US states and the District of Columbia to resolve US dollar Libor and Euribor rigging allegations. Despite settling, however, Barclays did not deny or admit to the findings.
If you suspect that your investment fraud losses are due to securities fraud, contact The SSEK Partners Group today. Our securities attorneys work with institutional investors and high net worth individual investors.
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HSBC Ordered to Pay $175M Fine Over Forex Trading Oversight, Institutional Investor Securities Blog, September 30, 2017
Oppenheimer Funds and Other Mainland Funds Take Financial Hit in the Wake Up of Hurricanes, Stockbroker Fraud Blog, October 14, 2017
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