The Department of Justice on Thursday announced indictments against two former traders for their role in manipulating a key interest rate that impacts more than $300 trillion in global financial contracts.
Matthew Connolly and Gavin Campbell Black are facing ten conspiracy and wire fraud charges for working to manipulate LIBOR—the London Interbank Offered Rate—in order to increase profits for their employer, Deutsche Bank AG.
Connolly was a director at the bank’s Pool Trading Desk in New York. Black served as a director for the bank in London. They joined thirteen other traders who’ve been charged so far, along with five banks, in the trans-Atlantic rate-rigging scandal.
“Millions of people around the world rely on LIBOR and other global financial benchmarks as accurate and honestly-reported rates,” said Assistant Attorney General Leslie R. Caldwell in a statement detailing the charges.
“Manipulation of these rates undermines the integrity of our financial system and the Justice Department will continue to hold accountable both the financial institutions and the individuals responsible for this conduct,” she added.
LIBOR is determined based on what are supposed to be authentic submissions by major banks on their creditworthiness. It was established to determine short-term interest rates for loans between banks.
The DOJ alleges that “in order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR,” Connolly and Black instructed their subordinates to submit false information to tilt the benchmark rate.
Another former Deutsche Bank director, Michael Curtler who managed the derivatives desk in London, was also named in the indictment. He pleaded guilty last October to conspiracy charges related to the scheme.
Deutsche Bank itself entered into a deferred prosecution agreement in April 2015 to avoid antirust and wire fraud charges. The bank agreed to a $2.5 billion settlement with US and UK authorities.
Last week, Citibank revealed it agreed to settle with the Commodities Futures Trading Commission for $175 million in penalties related to its role in tinkering with LIBOR.
The CFTC alleged that the bank, in part, tampered with the rate for months “to avoid generating negative media attention and to protect its reputation during the financial crisis.”
