Prop Firm sues the Big Banks

Discussion in 'Wall St. News' started by Maverick74, Jul 7, 2011.

  1. Maverick74

    Maverick74

    http://www.bloomberg.com/news/2011-...aims-banks-conspired-to-manipulate-libor.html

    Chicago Trading Firm’s Lawsuit Claims Banks Conspired to Manipulate Libor

    By David Voreacos - Jul 7, 2011 4:33 PM CT

    A Chicago trading firm accused Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), UBS AG (UBSN) and Citigroup Inc. (C) of conspiring to manipulate the London interbank offered rate.

    The banks drove down Libor to generate billions of dollars in profits from swaps, loans, interest rate derivatives and other financial instruments whose value depended on the rate, Eldorado Trading Group LLC said in a complaint filed July 5 in federal court in Newark, New Jersey.

    The civil lawsuit is one of several filed in response to probes by the U.S. Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission related to whether there were improper attempts to manipulate Libor. The rate, at which banks borrow from one another in the London interbank market, is a short-term, international benchmark.

    The banks “had a substantial incentive to manipulate, and in fact did manipulate, Libor downward, in order to increase the income from its interest rate derivatives and similar instruments,” according to Eldorado’s complaint. “This manipulation resulted in billions of dollars in revenue.”

    Eldorado owned futures and options contracts based on Eurodollar deposits traded on the Chicago Mercantile Exchange from August 2007 to December 2009, according to the complaint. It seeks to represent similar owners of contracts traded on the Chicago exchange.

    U.S. Probes

    Karina Byrne, a UBS spokeswoman, said the Zurich-based bank is cooperating with the U.S. probes, and has also gotten requests for information from the Japan Financial Services Agency and the U.K. Financial Services Authority.

    “We believe this suit is without merit,” Danielle Romero- Apsilos, a spokeswoman for New York-based Citigroup, said in an e-mail.

    Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment. Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, declined to comment.

    The case is Eldorado Trading Group LLC v. Bank of America Corp., 11-cv-3847, U.S. District Court, District of New Jersey (Newark).

    To contact the reporter on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net.

    To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.