At a time when it seemed global banks’ transgressions, from interest-rate rigging to money laundering, could hardly get worse, UBS has managed to break new ground with this week’s revelations of Libor manipulation.
Bloomberg reports that what sets UBS apart is not only the sheer extent of the behavior, but also the level of collusion with traders at other banks and the outright bribery of brokers who helped coordinate the manipulation.
One instance, which Bloomberg calls the 'Captain Caos' scheme, deserves its place in the hall of fame of financial chicanery. According to the final notice from the U.K.’s Financial Services Authority, traders at UBS colluded with their peers at other banks 'by entering into facilitation trades that aligned their respective commercial interests', so they could all benefit from manipulating interest rates in Japanese yen.
A UBS trader, according to the FSA notice, promised this to a broker aiding in the rigging effort: 'I’ll pay you, you know, 50,000 dollars, 100,000 dollars ... whatever you want ... I’m a man of my word'. The spelling-challenged traders and brokers who took part in the scheme came to address one another with monikers such as 'the three muscateers' and 'captain caos'.
Some arrests of lower-level traders and brokers have already been made in the U.K., and charges against individuals are expected in the U.S.
Regulators, prosecutors and criminal courts around the world have their work cut out for them in establishing the truth and punishing the guilty. The UBS and Barclays cases are just the beginning.
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