Two Former Deutsche Bank Employees Indicted on LIBOR Fraud Charges

The supervisor of the Pool Trading Desk in NY and a derivatives trader in London have been indicted for LIBOR

Two former employees of Deutsche Bank have been indicted for their alleged roles in the manipulation of the U.S. dollar London InterBank Offered Rate (LIBOR). With trillions of dollars of securities affected by the price of the benchmark interest rate, the duo could be facing a lengthy and difficult legal battle.

According to an announcement made by the U.S. Department of Justice (DoJ) a federal grand jury charged Matthew Connolly and Gavin Campbell Black with one count of conspiracy to commit wire fraud and bank fraud and nine counts of wire fraud for their participation in a scheme to manipulate the USD LIBOR rate in a manner that benefited their own or Deutsche Bank’s financial positions in derivatives that were linked to those benchmarks.

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Former Supervisor of Pool Trading Desk in NY in Custody

The former supervisor of the Pool Trading Desk in New York, Matthew Connolly, a resident of New Jersey, was taken into custody. He is expected to make his initial appearance in court this afternoon. Former Deutsche Bank derivatives trader and manager of the London Money Market Derivatives (MMD) Desk in London, Gavin Campbell Black, pleaded guilty in October 2015 to one count of conspiracy to commit wire and bank fraud in connection with his role in the scheme.

Commenting on the announcement by the U.S. DoJ, Assistant Attorney General Caldwell said: “This indictment charges two senior traders with manipulating LIBOR to gain an illegal advantage in the market. Millions of people around the world rely on LIBOR and other global financial benchmarks as accurate and honestly-reported rates.”

“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,” he elaborated.

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Black was a director on Deutsche Bank’s MMD Desk in London and traded USD LIBOR-based derivatives

According to allegations, while working at Deutsche Bank in New York, Connolly supervised traders who traded USD LIBOR-based derivative products. At the same time, Black was a director on Deutsche Bank’s MMD Desk in London, and traded USD LIBOR-based derivatives.

The charges state that in order to increase their profitability, Connolly allegedly directed his subordinates, and Black allegedly asked Deutsche Bank traders to submit false and fraudulent LIBOR quotes to benefit the positions of the traders or the bank.

The charges in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Back in April last year, Deutsche Bank settled wire fraud and antitrust charges by agreeing to pay a $775 million fine. The U.S. Justice Department has also engaged in settlement agreements with Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. and Lloyds Banking Group plc.

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