SEC Investigating Collusion in Credit Default Swaps

Bloomberg is reporting that investment banks are under investigation by the Securities and Exchange Commission for manipulation of the credit default swap market. Employees or former employees of investment banks with information about their price manipulation or collusion in the CDS market should consider contacting an attorney for assistance reporting the evidence to the SEC whistleblower program.

Even though the U.S. Government has already opened an investigation, a bank whistleblower with evidence of wrongdoing can still earn a reward under the Dodd-Frank program. The law requires an individual to provide original information which either opens up a new line of inquiry or significantly contributes to the existing investigation.

Problems within the mortgage backed securities and credit default swap market were at the heart of the Great Recession from 2007-2009. Investment banks which had sold a great deal of credit default swaps found that they were both illiquid investments and hard to value appropriately on their books. One of the primary goals of Dodd-Frank was to reform the operation of these markets.

Given the evidence we have seen produced by investment banks in other government investigations related to market manipulation and collusion, it would not surprise me if they were also breaking the law in the CDS market. The U.S. Government has already achieved significant settlements by several companies to resolve allegations of fixing benchmark interest rates (LIBOR) and the currency markets (FOREX). Various agencies are now proceeding with investigations into potential manipulation of the the ISDAfix, precious metals and the pricing of U.S. Treasury Bonds at auction.

For assistance reporting evidence of wrongdoing in the CDS market including manipulation, price fixing or other violations of the federal securities laws, please call our whistleblower attorneys at 1-800-590-4116.

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