The Justice Department announced that UBS Securities Japan Co. Ltd. (“UBS Japan”), a wholly owned subsidiary of Zurich-based UBS AG, has agreed to plead guilty to felony wire fraud for manipulating the London Interbank Offered Rate (“LIBOR”).
The LIBOR is the interest rate at which banks can borrow funds from other banks in the London interbank market. The LIBOR is determined daily by the British Bankers’ Association for ten currencies at fifteen borrowing periods. The LIBOR serves as the primary benchmark for global short-term interest rates for things such as mortgages, credit cards, student loans and other consumer lending products.
The criminal information filed in the U.S. District Court for the District of Connecticut alleges that UBS Japan engaged in a scheme to defraud by surreptitiously manipulating LIBOR benchmark interest rates. Two former senior UBS traders, Tom Alexander William Hayes of England and Roger Darin of Switzerland, were charged with colluding to manipulate Yen LIBOR interest rates. Hayes was also charged with wire fraud and price fixing.
The government alleged that, between July 2006 and September 2009, Hayes and Darin conspired to cause UBS to submit false and misleading Yen LIBOR submissions to the British Bankers’ Association in an attempt to systematically move the Yen LIBOR in a direction favorable to Hayes’ large trading positions. According to the government, Hayes estimated that a .01 percent movement in the Yen LIBOR on a specific date could result in a $2 million profit for UBS.
UBS Japan and UBS AG have agreed to pay penalties of $100 million and $400 million, respectively. To date, UBS AG and its related entities have incurred global penalties of $1.5 billion – $700 million in a Commodity Futures Trading Commission matter; $259.2 million in a U.K. Financial Services Authority action; and $64.3 in a Swiss Financial Markets Authority case relating to the alleged LIBOR manipulation.