Last week, Judge Naomi Buchwald of the Southern District of New York provided final approval of a nearly $22 million settlement between a class of indirect investors and five Wall Street banks that the plaintiff investors accused of manipulating the London Interbank Offered Rate (LIBOR) in violation of the Sherman Act. The plaintiffs are over-the-counter (OTC) investors who indirectly interacted with the defendant banks via interest rate swaps and other transactions. These plaintiffs made purchases from other banks that are not defendants in the case; the five settling defendants are JPMorgan, Citibank, Bank of America, HSBC, and Barclays. The suit is one of many filed after Barclays admitted in 2012 that it had manipulated LIBOR.
LIBOR is a benchmark that is designed to reflect the cost of borrowing funds in the market and is applied to many types of financial instruments, including futures, swaps, options, and bonds. It is also referenced by consumer lending products such as mortgages, credit cards, and student loans. The alleged LIBOR manipulation had a widespread impact on global markets and consumers, including government entities and not-for-profit organizations.
Plaintiffs alleged that the defendants, who are members of a panel assembled by a bank trade association to calculate a daily interest rate benchmark, conspired to submit artificial, depressed rates from August 2007 to May 2010. They claim that the defendant banks instructed LIBOR rate submitters to artificially lower their LIBOR submissions in order to avoid the appearance that the banks were in financial difficulty. Also, plaintiffs allege that the defendants’ traders asked LIBOR rate submitters to adjust the submissions to benefit the traders’ positions. Plaintiffs claimed that their positions in various financial instruments were negatively affected by this manipulation of LIBOR, in violation of the Sherman Act.
Under the terms of the settlement agreement, Citi must pay approximately $7 million, HSBC must pay $4.75 million, and JPMorgan and Bank of America must each pay approximately $5 million. Barclays will “substantially” assist the plaintiffs in ongoing related litigation against other banks, providing proffers, documents, and testimony to the plaintiffs, instead of making any payment. The other four defendants also agreed to provide “significant” cooperation to the plaintiffs in their continued litigation.
The case is In re: Libor-based Financial Instruments Antitrust Litigation, index number 1:11-md-02262, pending in the U.S. District Court for the Southern District of New York.