In Re: Libor-Based Financial Instruments Antitrust Lawsuit
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 Libor. 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.
On March 29, 2013, the District Court denied defendants’ motion to dismiss claims arising under the Commodity Exchange Act. On October 7, 2014, Barclays, one of the 16 defendant banks, entered into a settlement agreement with exchange-based plaintiffs to settle claims on a class wide basis for $19.975 million in civil payments. Additionally, Barclays will be required to share documents and information that is expected to strengthen claims in the litigation against existing and other potential new defendants. On February 28, 2018, the Court denied Plaintiff’s motion for class certification. That decision is on appeal which is pending.
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.