Libor, the London Interbank Offered Rate, is the interest rate set by the British Bankers’ Associations on the interest rate that large international banks claim they must pay when borrowing money from other banking institutions. The Libor rate is important because it’s used as a benchmark rate for trillions of dollars worth of contracts that impact the global market. As has been widely reported, Barclays, a British multinational banking institution, recently admitted to manipulating Libor rates. As a result of its manipulation of Libor rates, the United States and United Kingdom levied a $450,000,000 fine. It’s suspected that several other banks participated in the manipulation of Libor.
Unfortunately, as early as April 2008, the New York Federal Reserve was aware of potential misrepresentations regarding the Libor rate. However, the New York Federal Reserve did not act upon its own concerns, or even two warnings from a Barclays’ employee, that Barclays was manipulating the Libor rate. The manipulation of Libor rates essentially alters the interest rates on contracts worldwide. As a result, the contracts of small and large businesses are affected which ultimately impact consumers. Additionally, state governments are affected by the fraudulent rigging of the Libor rate of potentially millions of dollars. The derivatives market has been affected the most by the manipulation of Libor rates. This is because the derivative market is commonly pegged to Libor.
Additionally, many homeowners or investors might have benefited or lost out on Libor-pegged mortgages and derivatives. Those who lost out as a result of this manipulation include pension funds, insurance companies, and note holders, among others. Currently, a class action MDL led by the City of Baltimore is ongoing to recover millions of dollars lost by class members as a result of interest rate swaps that were impacted by fraudulent Libor rates.
Two states, New York and Connecticut, have launched an investigation into the manipulation of the Libor rate. The New York Attorney General has confirmed that his state launched a probe about six months ago. Additionally, the U.S. Department of Justice is building criminal cases against different banking institutions and their employees according to several different reports. Barclays has already terminated several traders involved in setting Libor rates and has had a recent shakeup of their top leadership. Barclays’ CEO, COO, and Chairman have all stepped down.
If you need more information on the Libor rate scandal or believe that you or a family member has been impacted by the scandal, contact Chad Stewart or Andrew Brashier, lawyers in our firm, at 800-898-2034 or by email at Chad.Stewart@beasleyallen.com at Andrew.Brashier@beasleyallen.com.
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