Exclusive: Prosecutors, regulators close to making Libor arrests

Mon Jul 23, 2012 1:25am EDT
 
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By Matthew Goldstein and Jennifer Ablan and Philipp Halstrick

(Reuters) - U.S. prosecutors and European regulators are close to arresting individual traders and charging them with colluding to manipulate global benchmark interest rates, according to people familiar with a sweeping investigation into the rigging scandal.

Federal prosecutors in Washington, D.C., have recently contacted lawyers representing some of the suspects to notify them that criminal charges and arrests could be imminent, said two of those sources, who asked not to be identified because the investigation is ongoing.

Defense lawyers, some of whom represent suspects, said prosecutors have indicated they plan to begin making arrests and filing criminal charges in the next few weeks. In long-running financial investigations it is not uncommon for prosecutors to contact defense lawyers before filing charges to offer suspects a chance to cooperate or take a plea, these lawyers said.

The prospect of charges and arrests means prosecutors are getting a fuller picture of how traders at major banks allegedly sought to influence the London Interbank Offered Rate, or Libor, and other global rates that underpin hundreds of trillions of dollars in assets. The criminal charges would come alongside efforts by regulators to fine major banks, and could show that the alleged activity was not rampant at the lenders.

"The individual criminal charges have no impact on the regulatory moves against the banks," said a European source familiar with the matter. "But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehavior of a gang of traders."

In Europe, financial regulators are focusing on a ring of traders from several European banks who allegedly sought to rig benchmark interest rates such as Libor, said the European source familiar with the investigation in Europe.

The source, who did not want to be identified because the investigation is ongoing, said regulators are checking emails among a group of traders and believe they are close to piecing together a picture of how the suspects allegedly conspired to make money by manipulating rates. The rates are set daily based on an average of estimates supplied by a panel of banks.

"More than a handful of traders at different banks are involved," said the source familiar with the investigation by European regulators.   Continued...

 
The letter "B" of the signage on the Barclays headquarters in Canary Wharf is hoisted up the side of the building in London July 20, 2012. REUTERS/Simon Newman