Deutsche Bank has agreed to pay more than $2.5 billion to the Commodity Futures Trading Commission, Department of Justice, New York Department of Financial Services and the U.K. Financial Conduct Authority to resolve their investigations into benchmark interest rate manipulation. The company is the sixth financial institution to resolve the allegations against it and the largest penalty so far in the London Interbank Offered Rate (LIBOR) investigations.
The CFTC issued a fine of $800 million, which sets a record for largest single penalty issued by the Commission. The derivatives regulator released a list of examples of misconduct by the bank that it found in written communications from 2005 to 2010. The examples detailed various traders and managers discussing internally and with submitters the need to raise or lower the interest rate submission. There are examples of attempts to manipulate the U.S. Dollar LIBOR, the Yen LIBOR, and the Euribor. There are also examples of coordination with other banks to fix the Euribor and the Yen LIBOR. The false reports and manipulation of the benchmark rates went so far as to attempt to manipulate the Sterling and Swiss Franc. The CFTC has now imposed over $4 billion in penalties against banks in its LIBOR and Forex investigations.
Deutsche Bank and its subsidiary will pay $775 million to the Justice Department in criminal fines for manipulating U.S. Dollar LIBOR and a price-fixing conspiracy to rig the Yen LIBOR. The subsidiary, DB Group Services (UK) Limited, agreed to plead guilty to wire fraud in the manipulation of LIBOR. The DOJ press release indicated that derivatives traders at the investment bank attempted to move benchmark rates in order to make more money on their trading positions and DB admitted that
The New York Department of Financial Services will be paid $600 million. Reaching agreement with NYDFS has reportedly been an issue for some banks as they seek to reach global settlements with the multiple regulators in the United States and abroad that are investigating them.
The UK FCA fined the bank 227 million GBP (roughly the equivalent of $340 million). The acting director of enforcement and market oversight at the British regulator said that the fine was compounded because the company repeatedly mislead them. They took “far too long” to produce the requested documents and did not quickly fix the systems and controls that had failed. The UK FCA specifically pointed to an inadequate system of auditing and investigating misconduct. It apparently took them over to years to identify and provide the audio recordings requested.
The regulator pointed to 29 individuals at the company, primarily based in London but also in Frankfurt, Tokyo and New York, that engaged in misconduct. It also added an accusation that I didn’t see made by any of the other regulators in their press release: the bank offered or bid in the market to attempt to influence the submissions of other banks.
Last year when the banks settled the first round of Forex investigations, we discussed the possibility that a whistleblower might receive a substantial sum of money out of the settlement. If a whistleblower were to provide information to the CFTC whistleblower program that resulted in a fine of the size paid by Deutsche Bank, an award well over $100 million would not be out of the question. If the maximum reward were issued, it could be as high as $750 million.
The bank is still being investigated for manipulation of the foreign exchange markets and the Wall Street Journal reported that there is speculation there will be an even higher fine in that case. DB is also under investigation for possible violations the U.S. economic sanctions against Iran.
For answers to questions about this and other aspects of the CFTC whistleblower program, as well as assistance reporting violations of the Commodity Exchange Act to the U.S. Government, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.