NY DFS Now Investigating Bank’s ISDAfix Manipulation

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The New York Department of Financial Services is now investigating manipulation of the ISDAfix benchmark, which is used in interest rate swaps. The CFTC issued subpoenas to nearly twenty players involved with the benchmark rate and later informed the Department of Justice to look into possible criminal issues that were discovered. The CFTC fined Barclays $115 million in May in the first ISDAfix settlement.

I suspect Barclays won’t be the only one fined in these investigations, either. Potential issues for Deutsche Bank related to the ISDAfix were reportedly made public recently by a report from Germany’s BaFin. The confidential report criticized Deutsche Bank’s co-chief executive Anshu Jain for statements made to the Bundesbank during an investigation. Jain announced his resignation in early June.

This investigation may be one of the first prosecuted after the changing of the guard among New York’s financial regulator. Benjamin Lawsky announced earlier this year that he was stepping down as the head of the department in under to start his own legal and consulting business. Lawsky will be succeeded temporarily by his chief of staff Anthony Albanese. Lawsky’s letter to the team announcing the news says that Governor Cuomo’s office is conducting a search for a permanent replacement.

Lawsky led the charge by the NY watchdog that led to $3+ billion in fines against banks during his four years. The DFS is the state regulator in charge of overseeing many global banks because they are licensed and operating in New York City.

It is unclear what this will do to the potential for expansion of New York’s whistleblower rewards. At the beginning of this year, Lawsky called for New York to adopt a financial whistleblower program similar to the SEC program. A bill to reward DFS whistleblowers has previously been considered by New York legislators.

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For ISDAfix Manipulation, CFTC Fines Barclays $115 Million

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Barclays has agreed to pay the CFTC $115 million to resolve its investigation into manipulation of the benchmark interest rate known as the ISDAfix. The misconduct occurred between 2007 and 2012, when U.S. traders attempted to manipulate the rate to favor their positions.

The announcement came in conjunction with the DOJ’s multi-billion dollar settlement of its criminal investigation into currency manipulation by banks.

Barclays was one of the panel banks submitting information to the U.S. ISDAfix rate. The bank tried to move the rate during the time period when it is calculated, according to the CFTC.

The ISDAfix is used for calculations of the costs on real estate loans and for payouts on pension funds. The process of determining the rate has since been changed. However, a group of other financial institutions that were involved in the process in the past are also under investigation by government authorities.

This is the first settlement that we know of related to the ISDAfix, which we have discussed before on our blog.  We haven’t seen any reports yet that there is an ISDAfix whistleblower.

Our CFTC whistleblower attorneys can assist you with answers to questions about this information as well as assistance reporting violations of the Commodity Exchange Act to the U.S. Government. To speak to an attorney, fill out our contact form or call 1-800-590-4116.

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