LIBOR Scandal: Manipulating Global Rates?

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LIBOR Scandal: Manipulating Global Rates?

The LIBOR scandal erupted in the wake of the 2008 mortgage crisis. LIBOR stands for the London Interbank Offered Rate. It serves as a global benchmark interest rate for a wide range of financial deals, including interbank lending. Afterword leaked that the traders of major multinational banks were allegedly involved in manipulating or fixing LIBOR, investigations, settlements, and convictions ensued.

In this article, we will explore what LIBOR is, how the LIBOR scandal reportedly occurred, and the ways it might have affected you or someone you know.

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LIBOR Definition


LIBOR stands for the London Interbank Offered Rate. It serves as a global benchmark interest rate for financial deals, including interbank lending.

LIBOR is currently calculated for five currencies (USD, GBP, EUR, CHF and JPY) and for seven tenors in respect of each currency. Thus, 35 individual rates get published for every applicable London business day.

LIBOR is referenced to determine a wide range of financial deals, including the interest rates that giant corporations will pay for loans, to the rates citizens have to pay for home mortgages or student loans. It is also utilized in derivative pricing.

If LIBOR gets manipulated, financial assets around the globe would be wrongly priced.

According to the New York Federal Reserve, a minimum of US$350 trillion in derivatives and other financial products are priced using LIBOR. Every business day a group of the world’s leading banks submits the interest rates at which each member is willing to lend. To get the rate of the day, the British Banking Association (BBA) discards the highest and lowest responses and takes the average of the rest.


  • Does LIBOR have a significant impact on the global finance industry?
  • Would manipulating LIBOR have a potentially negative effect on citizens, including those in the U.S.?

What is the LIBOR Scandal? 

The LIBOR scandal, coming to light July 27, 2012, refers to an alleged scheme in which bankers at several global financial institutions colluded to fix the London Interbank Offered Rate. Nonprofit, independent news organization The Conversation wrote on the LIBOR scandal, “…to the benefit of [the bankers’]  trading[, t]hey would work together and submit false interest rate figures to get the desired daily rate.”

However, word of foul play had already been circling leading up to the 2008 mortgage crisis, when “Barclays alert[ed] U.S. regulators to its concerns that other banks [were] submitting dishonestly low interbank rates” (per Reuters). The LIBOR scandal created rifts in the financial industry and led to a wave of fines, lawsuits, and regulatory actions.

Some claim LIBOR fixing had been going on for many years prior to the scandal. In 2012, ex-trader Douglas Keenan released an opinion piece in the Financial Times discussing his time working for Morgan Stanley during the 90s:

I talked to some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits… Simply put, then, it seems the misreporting of Libor rates may have been common practice since at least 1991. Although the difference between the reported rate and the actual rate might seem small, the total amount of money involved is material, given that Libor rates affect contracts worth hundreds of trillions.

Barclays Interest Rates

Barclays is a major British multinational investment bank and financial services corporation that generates $20+ billion in revenue annually. It allegedly became involved in manipulating LIBOR before and after the aforementioned 2008 mortgage crisis.

barclays submitting artificially low figureImage source: New York Times

According to the NYT graph above, “Barclays submitted artificially low figures to deflect scrutiny about its health…a Bank of England official questioned why Barclays’ submissions were high compared with other banks. After this, the Barclays rates fell closer to those of other banks.”


In 2012, after a joint investigation conducted by U.S. and British authorities, Reuters reported that Barclays paid “$453 million to… settle allegations that it manipulated key interest rates, increasing pressure on other banks to cooperate in a probe that could cost the financial industry billions of dollars…The attempted manipulation, which according to authorities took place from 2005 through 2009, meant that millions of borrowers paid too little or too much interest on their debt.”

In 2016, New York Attorney General Eric T. Schneiderman announced a “$100 million, 44-state settlement with Barclays Bank PLC and Barclays Capital Inc. for fraudulent and anticompetitive conduct involving the manipulation of U.S. Dollar (USD) LIBOR (the London Interbank Offered Rate) and other benchmark interest rates.”

Better Markets estimates the crisis caused upwards of $20 trillion in lost GDP. See what your fellow citizens have discovered about a potential economic foul play that might have caused the biggest financial collapse in history.


The UK’s Serious Fraud Office (SFO) sentenced four former Barclays Bank employees to a total of 17 years in prison following their convictions manipulating US Dollar LIBOR.

Per the SFO press release linked above, “Jonathan James Mathew, a LIBOR submitter, was sentenced to four years in prison…Jay Vijay Merchant and Alex Julian Pabon, both LIBOR traders, were sentenced to six and a half years and two years and nine months, respectively…Peter Charles Johnson, a submitter, pleaded guilty to conspiracy to defraud in October 2014. He was sentenced to four years in prison.”


  • Did Barclays attempt to manipulate LIBOR at least once between 2005-2009? 
  • Did the bank pay a settlement to U.S. and U.K. authorities for allegations of LIBOR manipulation? 
  • Were Barclays bankers convicted? 

The Deutsche Bank Investigation

After the Barclays case, the LIBOR scandal started to grow. Regulatory authorities—including those from the United States, the United Kingdom, Japan, Switzerland, and Canada— launched Investigations into fifteen other major financial institutions. Deutsche Bank, a German multinational bank, was one of the fifteen and received its staggering verdict in 2015.

DB Group Services, a UK subsidiary of Deutsche Bank, “pled guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR),” according to a Department of Justice (DOJ) press release. The DOJ ordered Deutsche Bank to pay approximately $2.519 billion.

The department’s investigation revealed numerous telling phone calls and emails. The following is one example found in the press release:

…a UBS trader asked a Deutsche Bank trader, “cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix…”  

The Deutsche Bank trader agreed. 

The next day, the Deutsche Bank trader confirmed that the Yen LIBOR submission had been beneficial to the UBS trader, asking “u happy with me yesterday?”  

The UBS trader acknowledged, “thx.”

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Despite the massive settlement, little success came in the form of convictions. The DOJ, in 2018, managed to get only two to (partially) stick. The department issued a press release, stating, “A former supervisor of Deutsche Bank’s Pool Trading Desk [Matthew Connolloy] and a former derivatives trader [Gavin Black] were convicted…for their participation in a scheme to manipulate the London Interbank Offered Rate (LIBOR).”

As far as allegations go, the press release states, “In order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR, Connolly directed his subordinates to reach out to Deutsche Bank’s LIBOR submitters to ask them to submit false and fraudulent LIBOR contributions consistent with his traders’ or the banks’ financial interests, rather than the honest and unbiased costs of borrowing, the evidence showed. The jury also heard evidence that Black asked Deutsche Bank’s cash traders who were responsible for submitting the bank’s LIBOR rates to ask that they adjust their submissions to favor his derivative trading positions.  According to evidence at trial, several Deutsche Bank LIBOR submitters accommodated the defendants’ LIBOR manipulation requests.”

A federal judge, per a Reuters report, ruled that the two traders would not serve any prison time for allegedly conspiring to manipulate LIBOR between 2005 and 2011, rebuking U.S. prosecutors for targeting the two men as “proxy wrongdoers.”


  • Did Deutsche Bank plead guilty to LIBOR-related wire fraud?
  • Was there proof from credible sources that traders working for Deutsche Bank had fixed LIBOR?
  • Do you think Connolly and Black should have served prison time?


UBS, per a Reuters report, “admitted to fraud and bribery in connection with efforts to rig the interest rates and agreed to pay $1.5 billion in fines to regulators in the United States, UK, and Switzerland.”

BBC published an article, quoting emails the authorities managed to dig up. We encourage you to read the short piece for more of the email evidence.

When one manager pleaded with his boss for permission to raise their own Libor submission in the hope of making more money, he argued: “…everyone will be trying to influence the fixing next Monday reflecting their positions. If we don’t do the same we risk an adverse PL [profit and loss].”

“if you keep 6s [six-month yen Libor] unchanged today … I will fucking do one humongous deal with you … Like a 50,000 buck deal, whatever … I need you to keep it as low as possible … if you do that …. I’ll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want … I’m a man of my word.”


Tom Hayes and Roger Darin, two ex-UBS traders, were charged with conspiracy to commit wire fraud. The Wall Street Journal wrote, “[Tom Hayes] was found guilty by a jury in 2015 on eight counts of conspiracy to defraud for his role in attempting to rig interest-rate benchmarks while working at UBS Group AG and Citigroup Inc.” Little news has come from Darin’s case.

The New York Times reported on evidence gathered during the investigation:

In one instance, Mr. Darin was hesitant to adjust the rate submissions too aggressively for fear of raising red flags. “i dun mind helping on your fixings,” Mr. Darin wrote to Mr. Hayes via Bloomberg. “but i’m not setting libor 7bp away from the truth,” adding “i’ll get ubs banned if i do that.”

Mr. Hayes was also willing to reward others to further his efforts, according to the complaint. At one point, Mr. Hayes trumpeted the work of an outside broker who helped him, saying “i reckon i owe him a lot more.” Another broker responded via Bloomberg that the person was “ok with an annual champagne shipment,” and “a small bonus every now and then.”


  • Did UBS admit to fraud and bribery in relation to LIBOR?
  • Was there evidence from credible sources that UBS traders had manipulated LIBOR? 
  • Were any of the traders convicted?

The Potential Effects of LIBOR Manipulation on Citizens

So, what does the LIBOR scandal mean to citizens?

To return to the quote from Douglas Keenan, “Although the difference between the reported rate and the actual rate might seem small, the total amount of money involved is material, given that Libor rates affect contracts worth hundreds of trillions.”

LIBOR is used to set the price of myriad financial deals, from your mortgage to student loans. If it was truly manipulated, who knows if you got ripped off due to fixed rates that enabled traders to unethically profit off of deals.

While it’s difficult to say who was ripped off, we can still consider how many citizens might have suffered from LIBOR manipulation. Individual homeowners, for example, could have initiated fixed-rate mortgages during periods when traders had artificially raised LIBOR. It would not be unreasonable, especially in the case of the homeowners, to view the extra costs incurred by artificially high rates as a form of ‘theft.’


  • Does LIBOR manipulation affect the global financial industry, as well as citizens? 
  • Do you consider it theft when you unknowingly take out a mortgage, for example, at an artificially high rate?

What do YOU Think About LIBOR Rigging?

The LIBOR scandal weakened the public’s confidence in the financial industry. Understandably, many questioned LIBOR as a credible benchmark rate. It is slated to be completely phased out by 2023. The Secured Overnight Financing Rate (SOFR) has already started to replace LIBOR.

After seeing the evidence presented in this article, where do you stand on the LIBOR scandal? It’s for you to voice your opinion and help your fellow citizens pinpoint what areas of our economy are or have been rigged against us.

Your vote helps citizens figure out how much is getting ripped off and by whom. That gives us the power, based on strong evidence, to start holding that gaming the system accountable for profiting unethically. All of us must decide democratically, by a vote.

If you are still undecided, your fellow citizens have investigated the issue and presented their own cases for why they believe or don’t believe the corporate tax rate should be viewed as rigged economy theft.

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The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.   

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