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Three charged with Libor manipulation

Sept. 25, 2013 at 2:25 PM   |   Comments

WASHINGTON, Sept. 25 (UPI) -- The U.S. Department of Justice said it charged three former brokers at British financial firm ICAP with fraud related to interest rate manipulation.

The former brokers Darrell Read, Daniel Wilkinson and Colin Goodman are charged with two counts of wire fraud and conspiracy to commit wire fraud. They face 30 years in prison for each count, the FBI said in a release.

Separately, regulators in Britain and the United States said ICAP had agreed to pay $87 million to end an investigation into Libor manipulation, The Wall Street Journal reported Wednesday.

The U.S. Commodity Futures Trading Commission is to be paid $65 million while the Financial Conduct Authority is to be paid $22.42 million.

The Libor is an abbreviation of the London interbank offered rate, which is supposed to be the average rate banks charge each other to borrow money. It is used as a benchmark rate. Trillions of dollars worth of loans are assigned interest rates based on the Libor.

To date, Barclays, UBS and Royal Bank of Scotland have spent about $2.5 billion to settle Libor manipulation investigations.

The FBI said the three brokers were paid handsomely for help manipulating the Libor, which requires only a fraction of a shift for large sums of money to be affected.

"For example, [ICAP client referred to as] UBS Trader once told Read that a 0.01 percent -- or one basis point -- movement in the final Yen Libor fixing on a specific date could result in $3 million profit for his trading positions," the FBI said.

"In exchange for bigger bonus checks, the three defendants undermined financial markets around the world by compromising the integrity of globally used interest rate benchmarks," the FBI said.

The FBI said Goodman, known to some as "Lord Libor," used an email that served as a newsletter to spread disinformation on "suggested Libors," to various large banks that, in turn, reported their borrowing rates to the British Bankers' Association, which calculated the Libor.

Wilkinson supervised Read -- and others -- in an office that handled derivatives trades, which "essentially consisted of bets between traders on the direction in which Yen Libor would move," the FBI said.

That is where UBS Trader enters the picture. The client referred to as UBS Trader was a substantial client of the ICAP brokerage who participated directly with Read in the scheming the FBI said occurred July 2006 to September 2009.

In one set of emails, Read wrote to UBS Trader, "I'd be careful how you play it. There might be cause for a [Libor rate] drop as you cross into a new month but a couple of weeks in might get people questioning you."

In a return email, UBS Trader replied, "don't worry will stagger the drops," the FBI said.

ICAP denied senior management had anything to do with the wrongdoing.

"I deeply regret and strongly condemn the inexcusable actions of the brokers," ICAP Chief Executive Officer Michael Spencer told reporters Wednesday.

"They have tainted the reputation of ICAP and the financial markets as a whole," he said.

© 2013 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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