CFTC Fines Citi, Affiliates for $175m for Yen LIBOR Manipulation

Citi and several Japanese affiliates were on the hook for $175M after their role in LIBOR manipulation and wrongdoing.

The US Commodity Futures Trading Commission (CFTC) has issued its latest order against multiple entities, settling charges with Citibank affiliates for its abuses of the London Interbank Offered Rate (LIBOR) as well as the Euroyen Tokyo Interbank Offered Rate (Euroyen TIBOR) benchmarks – the joint settlement was reached at $175 million, according to a CFTC statement.

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Citibank was under fire by the CFTC following earlier allegations and eventual charges that focused on the manipulation of LIBOR and Euroyen TIBOR rates. More specifically, Citibank, N.A., Citibank Japan Ltd. (CJL), and Citigroup Global Markets Japan Inc. (CGMJ), were all part of the filing, with each entity being charged with wrongdoing.

For its part, CGMJ was charged with attempts to manipulate yen LIBOR and Euroyen TIBOR rates – by extension the CFTC charged CJL with false reporting that centered on Euroyen TIBOR benchmarks. In this instance, the uneven reporting was designed to help benefit select derivatives trading positions with prices based on yen LIBOR or Euroyen TIBOR.

The CFTC had unearthed multiple cases of yen LIBOR manipulation by CGMJ between February 2010 through August 2010 as well as Euroyen TIBOR between April 2010 and June 2010. This was compounded by a senior yen derivatives trader who was brought in by CGMJ to help enhance the bank’s reputation in the Tokyo derivatives market – his tenure was mired by attempts to manipulate the benchmark fixings by utilizing his contacts at other yen LIBOR panel banks and at interdealer brokers to influence the yen LIBOR submissions of other yen panel banks.

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Furthermore, another employee of CGMJ, a senior manager who ran the group’s Tokyo interest rates derivatives trading desk, had pressured CJL’s Euroyen TIBOR submitters to alter their submissions to benefit the Senior yen trader’s derivatives trading positions.

Finally, the string of false reporting accusations was also applied to Citi, albeit of the US dollar LIBOR in a bid to stymie any negative media attention, thereby shielding its reputation during the depths of the financial crisis between 2008 and 2009. During this time Citi had been facing liquidity concerns that were exacerbated by the uneven economic climate unfolding. The bank had received a cash windfall to help its funding concerns, which Citi had used to help smooth over its image.

The charges are the latest by the CFTC’s multi-year crusade against bringing parties to justice in their involvement of the LIBOR scandals that convulsed the financial services industry over the past few years. Consequently, Citi and its Japanese affiliates were ordered to pay a collective civil monetary fine of $175.0 million. Overall however, the CFTC has lobbied fines of over $2.84 billion against entities for manipulative conduct with regard to LIBOR and other benchmark interest rates, reiterating its stance against market abuse.

According to Aitan Goelman, CFTC Director of Enforcement, in a recent statement on the appointment: “As evident by today’s actions, the CFTC’s vigilance includes holding a financial institution, like Citi, responsible each time it acts to undermine a benchmark for its personal profit or benefit”

“At the same time, the CFTC recognizes Citi for promptly self-reporting the Yen LIBOR misconduct to the Division of Enforcement. The value of self-reporting violations in a timely and effective manner and providing cooperation consistent with that of a responsible player in our markets will not go unnoticed by the CFTC,” he added.

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