Two Deutsche Bank Traders Convicted For Manipulating LIBOR Index
The federal government convicted two Deutsche Bank Traders in New York last week. The government accused the two traders from Deutsche Bank’s Pool Trading Desk of participating in a scheme to manipulate the London Interbank Offered Rate (LIBOR). The LIBOR Index is a critical global benchmark tied to trillions of dollars in derivatives and other financial products.
The Deutsche Bank traders were convicted after a month-long trial in Federal Court in Manhattan. A jury convicted former Deutsche Bank supervisor Matthew Connolly of one count of conspiracy and two counts of wire fraud. The court also found Gavin Campbell Black guilty of one count of conspiracy. However, they only found him guilty of only a single count of wire fraud.
Assistant Attorney General Benczkowski stated in a press release:
Matthew Connolly and Gavin Black undermined the integrity of our financial markets by manipulating LIBOR. The Justice Department and its law enforcement partners will aggressively investigate and prosecute individuals and financial institutions who engage in this sort of misconduct.
Deutsche Bank Reaps The Rewards Of Deutsche Bank Traders Manipulating The LIBOR Index
Connolly was Deutsche Bank’s director of the Pool Trading Desk in New York. He supervised traders who traded USD LIBOR-based derivative products. Black was a director on Deutsche Bank’s Money Market and Derivatives Desk in London. He also traded USD LIBOR-based derivative products.
The two hatched a plan to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR.
Connolly directed subordinates to reach out to DB’s LIBOR submitters to ask them to submit false and fraudulent LIBOR contributions. He wanted the contributions to be consistent with his traders’ or the banks’ financial interests rather than the honest and unbiased costs of borrowing.
Black also asked Deutsche Bank’s cash traders to adjust their submissions to favor his derivative trading positions. As a result, several Deutsche Bank LIBOR submitters accommodated Connolly and Black’s LIBOR manipulation requests.
Deutsche Bank entered into a deferred prosecution agreement in April 2015 to resolve wire fraud and antitrust charges. Deutsche Bank Group Services (UK) Limited also pleaded guilty to one count of wire fraud, collectively agreeing to pay a $775 million fine, for the bank’s role in the scheme. Two Deutsche Bank traders pleaded guilty to fraud charges related to the LIBOR manipulation scheme.