HSBC Settles Libor Rigging Lawsuit for $100M

To settle a private securities lawsuit in the US alleging Libor manipulation, HSBC Holdings Plc. (HSBC) has agreed to pay $100M. The bank is accused of conspiring to rig the London interbank offered rated (Libor) benchmark. The plaintiffs in the lawsuit are a number “over-the-counter” investors, including Yale University and the Maryland city of Baltimore, that dealt directly with banks belonging to the panel tasked with determining the key benchmark interest rate. Now, a court will have to approve the preliminary settlement.

The plaintiffs sued 16 banks for alleged Libor rigging in 2011. According to their case, HSBC and other banks conspired together to submit artificially low borrowing costs so that they could appear more financially robust and increase earnings. These lower borrowing costs led to a lower Libor, which had an adverse effect on institutions and persons that invested in pension funds, money market funds, mutual funds, the bond market, a number of derivative products, and bank loan funds.

Libor is the benchmark used to establish rates on hundreds of trillions of dollars of transactions, including those involving credit cards, student loans, and mortgages. It also allows the banks to figure out what it would cost them to borrow from one another.

Manipulation of a number of benchmark interest rates have led to regulatory fines in the billions of dollars. To date, banks have paid about $9B to resolve Libor manipulation investigations globally. OTC investors have been on the receiving end of $590M in settlements related to the rigging of the benchmark. Citigroup (C) settled with OTC investors for $130M. Deutsche Bank AG (DB) agreed to settle for $240M. Barclays Plc (BARC) settled for $120M.

Despite settling, HSBC maintains that it did not engage in any wrongdoing. The bank claims that the only reason it agreed to come to a resolution was to avoid the additional costs that come with litigation.

Another $100M Settlement for HSBC

It was just in January that HSBC arrived at a different $100M settlement, this one with the US Justice Department to settle front-running allegations involving client currency orders. Media outlets have since revealed that one of the clients affected was insurance company Prudential.

As part of that deferred prosecution settlement, HSBC admitted to defrauding two clients by engaging in front running. The bank is accused of making approximately $8M in trades before a significant currency purchase involving Cairn Energy. It made $38.4M from trading prior to a massive deal involving Prudential. (The Federal Reserve fined the bank $175M after finding that its traders not only engaged in front-running the orders of clients, but also they shared confidential customer information with other firms as part of HSBC’s effort to rig currency benchmarks.)

It wasn’t too long before that settlement that HSBC’s five-year deferred prosecution deal with the DOJ– this one following its involvement in a Mexican money laundering scandal–expired. The Justice Department dismissed its charges after finding that the bank had fulfilled its commitments to enhance its capabilities related to sanctions and anti-money laundering.

Our securities fraud lawyers are here to help institutional investors and high net worth individual investors in fighting to recover their securities losses. Contact our institutional investor fraud law firm today.

HSBC to pay $100 million to end Libor rigging lawsuit in U.S., Reuters, March 29, 2018

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Aegis Capital to Pay Over $1M to the SEC and FINRA to Settle Allegations Involving Low-Priced Securities and Anti-Money Laundering Violations, Institutional Investor Securities Blog, March 28, 2018

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