Traders accused of Euribor-rigging like a 'criminal gang' fixing betting odds, UK court hears

27 June 2018 12:15pm

11 April 2018. By Martin Coyle.

Five former Barclays and Deutsche Bank traders accused of manipulating a key global benchmark interest rate acted like a criminal gang fixing sports betting odds, a London court heard today.

The five cheated the financial system by “gaming” it and “ripping off” traders at other banks just to make money, jurors at Southwark Crown Court heard.

Achim Kraemer, an employee at Deutsche Bank, and former Barclays employees Colin Bermingham, Carlo Palombo, Sisse Bohart and Philippe Moryoussef face charges of conspiracy to defraud by manipulating the Euro Interbank Offered Rate, or Euribor, between 2005 and 2009.

All of the five deny the charges, but Moryoussef is being tried in his absence after failing to appear at the opening of the trial. He is currently in France.

James Waddington, opening the prosecution case for the Serious Fraud Office today, said the five were “intelligent professional people … flouting the system on a day-to-day basis.”

Another former Deutsche Bank trader, Christian Bittar — who earned as much as 47 million pounds ($67 million) in bonuses in some years — pleaded guilty to conspiracy to defraud Euribor last month, the jury was told. He will be sentenced after the trial ends.

Bittar’s plea proves the fraud, Waddington said today, and provides a “short cut” for the jury to decide whether the five others were involved in a conspiracy.

The court was told that “old friends” Bittar and Moryoussef worked together to persuade Bohart and Bermingham, who were responsible for submitting Barclays’ Euribor rate to the system that set the daily benchmark rate, to enter lower or higher rates. The latter two were prepared to “accommodate” the requests, said Waddington.

There were 48 banks responsible for entering figures to calculate the Euribor rate, which is the euro equivalent of the London Interbank Offered Rate, or Libor. “Miniscule movements” in the rate could generate big profits for traders, said Waddington.

“Like the criminal gang in the sports betting world, they attempted to cheat by fixing the result in their favor,” he said.

A trader stood to gain or lose very large sums of money by nudging the rate by “just a little bit,” taking away a fraction of the traders' risk of losing money. “It’s as if the casino has made the zero a little bit bigger on the roulette wheel,” Waddington said.

“Just like the person trying to fix a match, what these defendants did in one way or another … was to fix the odds.”

Jurors were told that they would hear recorded conversations between the defendants where they appear to congratulate themselves on their successes in rigging the markets. It provides a “running commentary” of the fraud, said Waddington.

Compliance systems at the banks failed to pick up alleged misconduct in messages and chat between the traders, Waddington said. “They weren’t configured to spotlight this type of conduct.”

The case, which is expected to last three months, continues.

Fintech Regulation in 2018