Investment Funds Claim Banks Conspired to Manipulate London Interbank Rate

Three European asset management firms accused banks including Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBA), Barclays Bank Plc, Citibank NA and Credit Suisse Group AG (CSGN) of conspiring to manipulate the London interbank offered rate.

The banks sold Libor-based futures, options, swaps and derivative instruments “at artificial prices that defendants caused,” harming investors, FTC Capital GmbH of Vienna, FTC Futures Fund SICAV of Luxembourg and FTC Futures Fund PCC Ltd. of Gibraltar said in an April 15 complaint in New York federal court.

From 2006 to 2009, the banks “collectively agreed to artificially suppress the Libor rate,” and in early 2008, “during the most significant financial crisis since the Great Depression,” the rate remained steady when it “should have increased significantly,” the funds contend.

A person close to an investigation on possible Libor manipulation said last month that regulators in the U.S. and U.K. were cooperating in the probe.

The U.S. Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission are investigating with the U.K.’s Financial Services Authority, according to two people familiar with developments.

FTC Capital bought and sold derivatives based on Libor, and the two other funds are part of FTC capital, according to court papers.

Libor’s Use

Libor is the rate of interest at which banks borrow funds from other banks in the London interbank market. It is used internationally as a short-term benchmark.

“We believe the suit is without merit,” said Danielle Romero-Apsilos, a spokeswoman for Citigroup.

Lawrence Grayson, a spokesman for Bank of America, declined to comment.

Allegations in the civil complaint include fraudulent concealment, violation of the U.S. Commodity Exchange Act, antitrust violations and unjust enrichment.

The funds seek unspecified damages in behalf of a class of derivative investors in a jury trial. The suit covers investors “who transacted Libor-based contracts on the Chicago Mercantile Exchange and over-the-counter market” from 2006 to June 2009, according to court papers.

Deutsche Bank spokesman Ronald Weichert declined to comment. Eberhard Roll and Walter Hillebrand-Droste, spokesmen for defendant WestLB AG in Dusseldorf, weren’t immediately reachable for a comment.

Officials at Lloyds Banking Group Plc (LLOY) and HSBC Holdings Plc weren’t immediately available. A spokeswoman at Barclays Plc (BARC) in London declined to comment.

Jennifer Zuccarelli, a JPMorgan spokeswoman, declined to comment. A spokeswoman for Credit Suisse in London declined to comment.

The case is FTC Capital v. Credit Suisse, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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