* First U.S.-based Libor traders charged by SFO
* Prosecutor says the 3 conspired with colleagues in London
* Next court appearance scheduled for Thursday
(Adds details of charges, possible sentence)
By Kirstin Ridley
LONDON, May 27 Three ex-traders from banking
group Barclays appeared in a London court on Tuesday as
Britain began criminal proceedings against U.S.-based Libor
traders, part of a global investigation into alleged rigging of
benchmark interest rates.
The Serious Fraud Office (SFO) alleges that Jay Merchant,
43, a director of dollar fixed-income swaps, and interest-rate
derivative traders Alex Pabon and Ryan Reich, aged 35 and 32
respectively, conspired together and with others to defraud
between June 2005 and September 2007.
The men, who spoke only to confirm their names and dates of
birth, allegedly conspired with three London-based former
Barclays employees, who have already been charged by the SFO, as
well as other Barclays employees to manipulate rates to improve
their own or their colleagues' trading positions.
British and U.S. prosecutors have charged 16 individuals to
date in connection with the investigation into alleged rigging
of benchmarks such as Libor (or London interbank offered rate),
against which around $450 trillion of financial contracts from
derivatives to credit card loans are priced worldwide.
U.S. and European regulators have meanwhile fined 10 banks
and brokerages - including JPMorgan, UBS,
Deutsche Bank, Royal Bank of Scotland and
ICAP - more than $6 billion to settle allegations.
Merchant, Pabon and Reich each face one count of conspiracy
to defraud, an offence which usually carries a maximum jail
sentence of 10 years in Britain. They were ordered to appear
before a higher Crown Court on Thursday.
Lawyers for Reich and Merchant have said their clients deny
allegations of wrongdoing. Pabon's lawyer declined comment.
Merchant, Pabon and Reich voluntarily attended London's
Westminster Magistrates' Court without the need for the SFO to
start extradition proceedings and have been allowed to remain
resident in the United States under their bail conditions.
But they each have to pay a 50,000 pound ($84,200) security
to the court, which they will forfeit if they fail to appear for
hearings. The next hearing has been scheduled at London's
Southwark Crown Court.
The SFO in February charged three former London-based
Barclays Libor submitters - Peter Johnson, Jonathan Mathew and
Stylianos Contogoulas - who were named as co-conspirators in
Tuesday's charges against Pabon, Merchant and Reich.
The submitters were supposed to accurately tell an industry
trade body the rates banks would charge each other for loans.
But traders are alleged to have colluded on answers that could
nudge the reported rates by amounts that were tiny but could
translate into big profits.
The investigation into benchmark interest rates has been
partly overshadowed by a parallel global inquiry into
allegations of foreign-exchange market rigging, which has led to
about 35 people being suspended, placed on leave or fired.
But the inquiry into Libor and related Euribor rates has
been gathering steam. British and U.S. watchdogs fined brokerage
RP Martin $2.3 million two weeks ago to settle claims its staff
helped manipulate Libor, and in March the SFO charged three
former ICAP brokers.
Barclays was the first bank to settle U.S. and UK regulatory
allegations of rate manipulation, paying around $450 million in
fines in 2012. Regulators admitted privately they were taken
aback by an ensuing public and political backlash, which forced
out four top Barclays directors including Chief Executive Bob
Diamond, sparked a fraud squad probe and parliamentary reviews.
The British bank was fined another 26 million pounds last
week for failing to prevent a trader from allegedly manipulating
Thomson Reuters calculates and distributes Libor on
behalf of a subsidiary of U.S.-based ICE (Intercontinental
Exchange). ICE became the administrator for Libor on
Feb. 1 after the British Bankers' Association was stripped of
($1 = 0.5936 British Pounds)
(Editing by David Holmes)