Ex-Deutsche Bank traders oppose US Govt efforts to seek “misleading testimony” from BBA

Maria Nikolova

Matthew Connolly and Gavin Campbell Black, defendants in a LIBOR-rigging case, oppose the US Government’s last-minute motion to obtain evidence from the British Bankers Association.

Matthew Connolly and Gavin Campbell Black, former derivative product traders at Deutsche Bank, who stand accused of wire fraud in a LIBOR-rigging case, have sought to oppose the last-minute efforts by the United States Government to obtain the testimony of certain individuals from the British Bankers Association (BBA).

Let’s recall that earlier this month, the Department of Justice sharply reversed its stance on whether any testimony from the BBA is necessary in this case. The DOJ asked the Court to allow taking depositions from:

  • Sally Scutt, a former deputy chief executive of the British Bankers Association (BBA);
  • one or more current BBA employees to authenticate and establish BBA documents as business records.

The defendants in the case have objected to this request. On Monday, April 16, 2018, they filed a Memorandum in opposition to the Government’s motion with the New York Southern District Court.

In their Memorandum, the former traders argue that the BBA evidence that the Government now seeks to obtain is contradicted by the BBA’s own recent admissions in the UK proceeding brought against it by the Federal Deposit Insurance Corporation (FDIC). Because the BBA’s admissions fundamentally repudiate the Government’s theory of prosecution, “the Court should not accommodate the Government’s selective request for what is plainly misleading testimony from certain BBA witnesses”.

On July 7, 2017, the FDIC filed a Particulars of Claim in the UK against various defendants, including the BBA. On December 20, 2017, the BBA responded by filing its response. Importantly, the statements in the BBA Response demonstrate that a BBA witness could not truthfully testify that

  1. the BBA was deceived by panel bank submissions that incorporated institutional interests and

  2. individual panel bank submissions were material in the calculation and setting of LIBOR.

In particular, the BBA Response states that at a meeting between the BBA and the Bank of England, John Ewan, the former LIBOR Director of the BBA, informed the Bank of England that the responses from the LIBOR review were that “the product was in good health, and clearly understood in the market”, but “there was a market consensus that the GBP-USD LIBOR was some 3-4 [basis points] over the actual market rate” and “This was essentially a construct of the market, as it is in the interest of banks to have a higher LIBOR.”

These admissions, according to the former Deutsche traders, demonstrate that any suggestion from the Government that the BBA was deceived is false and misleading.

The BBA Response also demonstrates that the BBA did not consider any LIBOR “manipulation” by an individual bank to be possible, according to the ex-traders, and that incorporation of a bank’s interests was permissible. The BBA Response is clear: “As to the ability of the Bank Defendants to manipulate LIBOR, the trimming and averaging approach meant that no individual Panel Bank had the ability to manipulate LIBOR by a material amount.”

In addition, the defendants in the LIBOR-rigging case challenge the Government’s choice of BBA witnesses. Thus, Ms. Scutt was a part-time BBA employee who was not involved with LIBOR until 2009, they note. During the Claim Period (defined as August 2007 to at least the end of 2009), Ms Scutt was only contracted to work two and a half days a week for the BBA. That is, the evidence the Government seeks is seen as unreliable.

If, however, the Court grants the Government’s Motion, the defendants request that the Court allow them to take the deposition of John Ewan, the former LIBOR Director of the BBA, and obtain additional documents from the BBA.

The case is captioned USA v. Connolly (1:16-cr-00370).

Read this next

Retail FX

eToro is latest platform to suspend Terra’s LUNA, Binance resumes trading

Israeli social trading network eToro has become the latest platform to suspend trading on the Terra (LUNA) cryptocurrency in light of a market-wide downturn.

Industry News

UK court allows ThinkMarkets’ “obscure” B-book claims against IS Prime

“The Judge added that “Think did need to address the concerns expressed” as its counterclaim “suffers from a lack of detail, obscurity and potential inconsistency”.

Retail FX

Brazilian Broker XP launches crypto trading to 3.5M users

XP Inc (XP.O) is set to launch a crypto trading platform, dubbed ‘XTAGE’, as Brazil’s largest broker is looking to tap into the growing interest in trading bitcoin and other digital assets.

Retail FX

easyMarkets adds MT5 as demand for platform continues to grow

easyMarkets has joined a growing group of brokers in switching over to MetaTrader 5 (MT5), becoming the latest retail platform to incorporate the platform into its live trading infrastructure.

Institutional FX

SGX’s FX volume shines in a largely lackluster April

The Singapore Exchange (SGX) notched a healthy gain in its FX and indices volumes, despite seeing a wavering performance across commodity and securities segments.

Industry News

Devexperts webinar: Attracting retail traders with fractional trading

Following the successful webinar on introducing crypto to retail investors, Devexperts is returning to host a new one about fractional trading. 

Digital Assets

Relai to launch bitcoin debit card to unlock BTC via every purchase

To attract more retail investors to the crowdfunding project, Relai has promised 0% fees on transactions on the Relai app for those who invest €5,000 or more.

Digital Assets

Amid crypto meltdown, Tether reduces corporate debts in USDT reserves

Tether, which is closely affiliated with crypto exchange Bitfinex, has drastically reduced its holdings of commercial debt in its reserves over the last six months. Instead, the stablecoin issuer allocated most of its non-fiat reserves to Treasury bills, almost doubling assets in short-term government securities.

Industry News

TrustPay launches SEPA instant payments

” Our clients will now be able to make instant transactions with the immediate settlement of funds, which makes business more effective in today’s fast world.”