On June 14, 2011, Berger & Montague filed a class-action
lawsuit against 13 global banks on behalf of investors who
transacted in Eurodollar futures contracts and options on futures
contracts on the Chicago Mercantile Exchange ("CME") between August
2007 and May 2010 (the complaint is available for download
here). The now consolidated class action lawsuit, In Re:
Libor-Based Financial Instruments Antitrust Litigation,
alleges that the banks colluded to misreport and manipulate Libor
rates, thereby harming investors in futures, swaps, and other
Libor-based derivative products.
About the case:
On June 27, 2012, Barclays Bank announced that it had agreed to
pay a $453 million fine to settle allegations that it manipulated
As part of the U.S. and U.K. settlements, Barclays admitted rigging
Libor, as well as Euribor, its equivalent in euros, as early as
2005. In testimony to Parliament last week, the former CEO of U.K.
based Barclays, Robert Diamond, apologized and said 14 Barclays
traders were involved.
The British Bankers Association ("BBA") established Libor
based on the rates that designated banks for each currency would
have to pay for an unsecured loan for each designated maturity
period. LIBOR is set by the BBA and its member banks. Libor is
crucial to the operation of global financial markets because it is
the primary benchmark for short term interest rates.
The lawsuit alleges that the defendant banks knowingly and
intentionally understated their true borrowing costs. By doing so,
the defendant banks caused Libor to be calculated or suppressed at
artificially low rates. The defendants' alleged manipulation
of Libor allowed their banks to pay artificially low interest rates
to purchasers of Libor-based financial instruments. As a
result of their alleged illegal activity, the defendant banks
reaped hundreds of millions, if not billions, of dollars. The
defendant banks may also have engaged in other trading schemes that
ensured they would profit based on their suppression of Libor.
The lawsuit also alleges that in 2008, although the defendant
banks were facing different financial stresses due in part to the
financial crisis, they submitted Libor rates to the BBA that did
not vary markedly and were lower than they should have been.
However, the lawsuit alleges, in an unmanipulated marketplace the
rates reported by the defendant banks should have risen
significantly during that period of financial instability. By
submitting artificially low borrowing rates, it is believed that
the defendant banks were not only able to profit from their lending
and trading activities, but they were also able to make their banks
appear more financially stable than they actually were.
Numerous government regulatory agencies, including the
Securities and Exchange Commission, the Commodity Futures Trading
Commission, the Department of Justice, the Japanese Financial
Supervisory Agency, the United Kingdom's Financial Services
Authority, and the Canadian Competition Bureau are continuing to
investigate the reporting practices of the banks reporting Libor
rates during the relevant period.
The defendants, which are the banks that served on the U.S.
dollar LIBOR panel of the BBA during the alleged conspiracy and
their corporate affiliates, are: Credit Suisse Group AG; Bank
of America Corporation; Bank of America, N.A.; JP Morgan Chase
& Co.; JP Morgan Chase Bank, N.A; HSBC Holdings plc; HSBC Bank
plc; Barclays Bank plc; Lloyds Banking Group ;plc; WestLB AG;
Westdeutsche Immobilienbank AG; UBS AG; The Royal Bank of Scotland
Group plc; Deutsche Bank AG; Citibank NA; Citigroup Inc.;
Coöperatieve Centrale Raiffeisen Boerenleenbank B.A.; The
Norinchukin Bank; The Bank of Tokyo-Mitsubishi UFJ, Ltd.; HBOS
plc; and Royal Bank of Canada.