U.S. and British authorities on Wednesday fined ICAP, the world's biggest interdealer broker, $87 million and criminally charged three former employees for their role in the Libor benchmark rate rigging scandal.
The scandal, which has laid bare the failings of regulators and bank bosses, has triggered a sprawling global investigation that has already seen three banks fined $2.6 billion, four individuals charged, scores of institutions and traders grilled and a spate of lawsuits launched.
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The U.S. Department of Justice (DoJ) charged New Zealand resident Darrell Read alongside Daniel Wilkinson and Colin Goodman, both from England, with conspiracy to commit wire fraud and two counts of wire fraud in a criminal complaint.
Simultaneously, the U.S. Commodity Futures Trading Commission (CFTC) and UK Financial Conduct Authority (FCA) ordered ICAP's ICAP Europe Ltd unit (IEL) to pay $65 million and 14 million pounds ($22 million), respectively, to settle allegations of wrongdoing.
"These three men are accused of repeatedly and deliberately spreading false information to banks and investors around the world in order to fraudulently move the market and help their client fleece his counterparties," said acting assistant attorney General Mythili Raman of the DoJ's criminal division.
They each face a maximum penalty of 30 years in prison for each count in the event of a successful conviction.
ICAP, run by London businessman Michael Spencer, is the first interdealer broker sanctioned for manipulating benchmark rates such as Libor, the London interbank lending rate, which is used to price trillions of dollars worth of products such as derivatives and mortgages worldwide.
Brokers like ICAP, which match buyers and sellers of bonds, currencies and swaps, have faced allegations that their employees actively colluded with traders seeking to fix rates for personal gain - and were handsomely rewarded.
Wilkinson, employed in the London office of ICAP, supervised a group of derivatives brokers, including Read, who specialised in yen-based products.
According to the charges, the desk's biggest client between 2006 and 2009 was Tom Hayes, the former UBS and Citigroup trader who is also facing criminal charges in Britain and the United States.
Read talked to Hayes almost daily, prosecutors said, and a big part of the ICAP traders' compensation was tied to the business generated by him.
Goodman, a cash broker in ICAP's London office nicknamed "Lord Libor", was meanwhile in contact with derivatives traders at other banks and sent out a daily email with "SUGGESTED LIBORS", prosecutors said.
Hayes allegedly sent requests in through derivatives traders, who passed them on to Goodman. In 2006, prosecutors said, Read asked Goodman to suggest a high six-month rate, saying: "the trader from ubs Tokyo will come over and buy you a curry himself!".
The conduct stretched into 2010, well after allegations of Libor manipulation had surfaced in the public.
"We deeply regret and strongly condemn the inexcusable actions of the brokers who sought to assist certain bank traders in their efforts to manipulate yen Libor," said ICAP Chief Executive Michael Spencer in a statement.
Tracey McDermott, the head of enforcement at the FCA, said the misconduct cast a shadow over the financial services industry as she denounced the "cavalier disregard" the ICAP subsidiary had shown both for its regulatory obligations and the interests of the markets.
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Three banks - Britain's Barclays and RBS and Switzerland's UBS - have paid around $2.6 billion to date to secure civil settlements for rate rigging with UK and U.S. regulators. Britain's Serious Fraud Office (SFO) has levelled criminal charges at three individuals, and U.S. prosecutors have now charged five.
Both have charged Hayes, a Briton being prosecuted in Britain, who once complained in a text message to the Wall Street Journal: "This goes much higher than me."
The cash-strapped SFO has said it hopes to charge more individuals over Libor rate rigging this autumn and has tried to reassure critics it will not hesitate to also pursue senior industry figures or even institutions.
Rabobank, a Dutch bank cooperative, is now expected to become the fifth institution fined by U.S. and UK regulators. Others, such as Deutsche Bank, do not expect to reach a settlement until next year.