If you’ve been following the LIBOR interest-rate rigging scandal that is causing Wall Street to implode right now, you may be aware that major global banks all over the world are being dragged into the mess.
Individual traders from these banks are getting pinned with the blame. Bloomberg reports that Michael Zrihen at Credit Agricole, Didier Sander at HSBC, and Christian Bittar at Deutsche Bank are all under investigation over their involvement in the manipulation of LIBOR.
The interesting thing is that none of these traders even actually work for the banks in question anymore. In fact, they’ve all been gone for a while.
Michael Zrihen left Credit Agricole in October of 2010, according to his Bloomberg profile.
Didier Sander left HSBC in August of 2010 (via his terminal).
And Christian Bittar left Deutsche Bank in early May, before this whole LIBOR scandal blew up at Barclays.
So, the individuals that banks and regulators are deflecting the heat toward over this whole thing haven’t even been involved in the rate rigging for years, in the case of the first two names. At least, not at the banks.
In fact, many seem to be turning up at Swiss hedge funds, and now the funds could be the next bunch to be dragged into the scandal.
The financial blog Zero Hedge did some digging on LinkedIn yesterday and they found several traders – Zrihen, Sander, and Bittar included – that ended up at various Swiss hedge funds on essentially the same desks they were on while working at the banks, trading interest rate derivatives.
From Zero Hedge (emphasis theirs):
The original LinkedIn list continues (much to the likely chagrin of at least one SocGen trader and one more CA-CIB banker), but we have seen enough, and the pattern is forming: it appears that the bankers who were allegedly involved in Libor manipulation in some capacity in their previous lives working for banks, decided to quietly depart under mutually acceptable conditions and find new lives, still trading Libor and IR derivatives, in some of the best known, and even less regulated, Swiss hedge funds and private banks.
Our question then is the following: while much has been said about Lieborgate as being purely associated with the 16 BBA USD fixing member banks, just who else made money, and is the traditionally quiet and always under the radar Swiss financial community about to be exposed for having profits far more from Lieborgate than any of the BBA member banks?
On a separate occasion in February, Bloomberg reported that Christopher Cecere, a former trader at Citigroup in Tokyo, was under investigation for his role in allegedly manipulating TIBOR (Tokyo Interbank Offered Rate). Where did Cecere end up after leaving Citigroup in 2010? The Swiss office of European hedge fund giant Brevan Howard.
So, how could hedge funds have benefitted from the rigged LIBOR submissions? Reuters reported on March 30 that Brevan Howard requested a manipulation of the bank’s submission from RBS in order to profit from its trading positions.
Brevan Howard, one of Europe’s largest hedge funds, asked Royal Bank of Scotland PLC to change the Libor rate, a former trader for the British bank said in court documents filed in Singapore…
Tan Chi Min, who was head of delta trading for RBS and based in Singapore, said in papers in a wrongful dismissal case that the fund telephoned the bank on August 20, 2007 and asked if they could change the bank’s submission…
“The defendant (RBS) received this request without objection,” Tan said in the papers filed at Singapore’s High Court on March 23.
We’re already starting to see a reaction from the hedge funds. Reuters is reporting that Michael Zrihen has been suspended from trading (as of today) at Lombard Odier, the fund where he works.