Euribor and Libor scandals: SFO prosecutes former City bankers and FCA issues a warning to banks

16th July 2018 Business Crime

A three-month trial against several former City bankers has concluded with the Serious Fraud Office's (SFO) first prosecution of two former traders in relation to the Euro Interbank Offered Rate (Euribor).

The former senior bankers were investigated and prosecuted by the SFO for manipulating Euribor during the financial crisis. The investigation was part of a wider investigation by the SFO into the manipulation of Euribor, and other investigations are still ongoing.

Euribor is the European version of the London Interbank Offered Rate (Libor) in Britain, and is a financial benchmark rate used to set financial deals around the world it underpins $180 trillion of financial products worldwide.

The SFO's case was that during the financial crisis from 2005 to 2009, the individuals dishonestly manipulated Euribor in order to make a profit. The SFO argued that the defendants submitted false or misleading Euribor submissions to benefit their positions and change the published rate.

Phillipe Moryoussef, who previously worked for Barclays Bank, was found guilty at Southwark Crown Court, after his co-accused Christian Bittar, a former Principal Trader at Deutsche Bank pleaded guilty in March of this year. Bittar was described during the trial as being the ringleader of the conspiracy; he was formerly one of the highest-paid traders in the world, earning almost £60 million between 2005 and 2009. Achim Kramer, also a former employee at Deutsche Bank, was found not guilty and a further three former traders, Carlo Palombo, Colin Bermingham and Sisse Bohart all previously of Barclays Bank also stood trial but the jury was unable to reach verdicts in relation to all three. The SFO will now decide whether it intends to proceed with a re-trial in respect of those individuals.

The court heard that the bankers had been conspiring via email for several months in preparation for their manipulation of the Euribor, and that they congratulated themselves when their plans succeeded.

The defendants claimed that they hadn't realised that their actions were dishonest and argued that it was normal practice, but their emails discussed the need to keep quiet about what they were doing and boasted about the profits they would receive.

The trial came to an end in the same week as the Financial Conduct Authority (FCA) issued a statement to banks, advising them to accelerate their efforts to move away from Libor as a basis for their business, after the rate was found to be inaccurate and open to manipulation. The head of the FCA has said that the pace of the transition away from Libor is not yet fast enough. Libor's reputation was damaged by a series of fraudulent rate-fixing scandals in the past decade, when it was discovered that banks were falsely modifying rates in order to generate a profit from trades, or to appear more creditworthy. Banks have been fined $9 billion for trying to rig Libor, and the FCA is now advising banks to transition from Libor to the Sterling Overnight Index Average (Sonia) which was set up by the Bank of England in response to the Libor scandal.

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Lizzie McPeake is a Solicitor located in Manchesterin our Commercial Litigation department

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