Libor Rigging Like Stealing, SFO Says at Barclays Traders Trial

  • Five ex-Barclays traders on trial for conspiracy to defraud
  • Trader sought `crazy low setting,' according to message

Five former Barclays Plc traders accused of rigging benchmark interest rates took part in an activity "not different from stealing," U.K. fraud prosecutors said at the start of a 13-week trial.

"Their goal was to make more profit on their trading" and they were rigging the London interbank offered rate "for their own advantage,” said James Hines, a lawyer for Britain’s Serious Fraud Office.

Jonathan Mathew, 35, Stylianos Contogoulas, 44, Jay Merchant, 45, Alex Pabon, 37, and Ryan Reich, 34, all deny the charges of conspiracy to defraud with other Barclays employees between June 1, 2005 and August 31, 2007.

Barclays was the first bank to be fined in relation to Libor, paying a 290 million-pound ($412 million) penalty in June 2012 -- a step that led to the departure of Bob Diamond, the lender’s chief executive officer. Since then, global regulators and prosecutors have racked up about $9 billion in fines from a dozen banks in relation to the manipulation of interest-rate benchmarks. Libor underpins more than $350 trillion of securities around the world.

Derivatives Traders

Reich, Pabon and Merchant were employed as derivatives traders in Barclays’ New York offices while Contogoulas traded from London. Mathew was the London-based submitter of the Libor rate that the traders dealt with, Hines said.

In order to maximize profit the defendants agreed between themselves to rig the rate, Hines said. He told the jury the New York traders would tell the London submitters which way they wanted the rate to go, up or down, to suit their derivative positions.

Then the submitters would try to ensure their requests were carried out, he said.

Prosecutors cited a series of expletive-riddled communications between the defendants that showed traders urging each other to lower the rate for the next day.

"Our desk has a big position," Hines said, quoting from one of the messages. "We are very much in a favor of a crazy low setting."

The prosecution said Contogoulas also gave an "insight" into the profits that could be made by fixing the rate. "Could you please tell me what next week’s lottery numbers are. I’d appreciate it," Hines said, reading the trader’s message.

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