Li(e)borgate Set To Become "Next Big Litigation Thing" As Lawsuits Against Libor Banks Avalanche

Tyler Durden's picture


Last week we discussed the gradual unraveling of a topic we had been following for the past 3 years, namely the brazen and criminal manipulation in the Libor market, which directly and indirectly impacts a stunning $350 trillion worth of securities (and thus, their implied risk, and hence, prices). Today we are delighted to learn that the retribution against these banks who have been artificially representing to the market that they are in better condition than in reality (courtesy of Libor's "strict" self-reporting approach), are beginning to see lawsuits filed against them, with Schwab merely the latest out of the gate. And just as fraudclosure was the litigation topic of 2010 and 2011, sit down and watch as Li(E)borgate explodes into the biggest litigation pain for banks, with litigation expenses that could easily surpass both the robosigning scandal (and its robo-settlement) and the escalating banks Reps and Warranties scandal. Because as recent evidence confirms, there are likely emails proving manipulation exists black on white, as discussed last week. Which means that the case of Schwab, noted last summer by Reuters, is about to become a pandemic.

From Reuters:

Charles Schwab Corp, the discount brokerage and money manager, has filed two lawsuits accusing 11 major banks of conspiring to manipulate Libor, which is used to set interest rates on hundreds of trillions of dollars of securities.


According to complaints filed Tuesday with the U.S. District Court in San Francisco, where Schwab is based, the banks violated antitrust, racketeering and securities laws by teaming up to depress the London Interbank Offered Rate, a floating benchmark for what banks charge each other on short-term loans.


Schwab's lawsuits said the collusion deprived it of returns on tens of billions of dollars of Libor-based investments that the company and eight of its money market and ultra-short term bond mutual funds made from 2007 to early 2011.


"Surreptitiously bilking investors of their rightful rates of returns on their investments, defendants reaped hundreds of millions, if not billions, of dollars in ill-gotten gains," Schwab said. Its lawsuits seek unspecified actual and punitive damages, which Schwab said can be tripled under federal law.

Who is being sued? Why everyone's favorite bailed out (alleged) criminals of course:

Defendants include the three largest U.S. banks -- Bank of America Corp, JPMorgan Chase & Co and Citigroup Inc. Others include Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings Plc, Lloyds Banking Group Plc, Royal Bank of Scotland Group Plc, UBS AG and WestLB AG. Bank of America spokesman Lawrence Grayson declined to comment, but Citigroup spokeswoman Danielle Romero-Apsilos said: "We believe the lawsuits are without merit." JPMorgan did not immediately respond to a request for comment.

We wonder as a result of all these lawsuits how long until the BBA (allegedly) criminal syndicate will indicate USD Libor continues to decline even as the ECB's  borrowings under the FX swap facility are back at two and a half year highs. At the end of the day, is it too much to ask to have at least one market metric that is not manipulated or otherwise the subject to outright fraud?

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Wed, 02/15/2012 - 14:59 | 2162853 hedgeless_horseman
hedgeless_horseman's picture



As if the WSJ Prime Rate is any better.

Wed, 02/15/2012 - 15:11 | 2162917 whatsinaname
whatsinaname's picture

its bullish - there will be another fine settlement!!

buy buy buy

Wed, 02/15/2012 - 15:35 | 2163008 Thomas
Thomas's picture

Banks trying to manipulate markets: What is new about this story? Aren't they always attempting to manipulate markets? Aren't the central bankers constantly trying to manipulate markets? I'm lost.

Wed, 02/15/2012 - 15:56 | 2163112 Bansters-in-my-...
Bansters-in-my- feces's picture

@ Thomas... What the hell do you mean trying.

"I'm lost".

Wed, 02/15/2012 - 21:47 | 2164392 Buck Johnson
Buck Johnson's picture

It's the death of a thousand cuts, these keep coming and coming and it seems not to end.  The govt. along with the banks have helped each other to stay off a massive depression, but what I believe they did was to stay it off temporarily and it will still come.  The problem with manipulating everything is that it destroys forcasting for the future and the past indicators can't work because those don't take into account the manipulation of many of the variables to an outragous point.

Wed, 02/15/2012 - 14:59 | 2162854 Sandmann
Sandmann's picture

Will anyone actually go to gaol for this scam ? These bankers seem to avoid the Jeff Skilling Penalty

Wed, 02/15/2012 - 19:49 | 2164064 ACP
ACP's picture

All roads lead to the Fed, so no.

Wed, 02/15/2012 - 15:00 | 2162856 GeneMarchbanks
GeneMarchbanks's picture

Them cross currency swaps will not be impacted.

Wed, 02/15/2012 - 15:00 | 2162859 Quintus
Quintus's picture

" it too much to ask to have at least market metric that is not manipulated or otherwise the subject of outright fraud?"


Given that lies and manipulation are the only things preventing outright panic and systemic collapse, I would say Yes, it probably is too much to ask.

Wed, 02/15/2012 - 15:01 | 2162867 CvlDobd
CvlDobd's picture

The BTFDness of this market is unbelievable!

Wed, 02/15/2012 - 15:38 | 2163026 Jonas Parker
Jonas Parker's picture

Quintus, you beat me to it!

Wed, 02/15/2012 - 15:02 | 2162872 Vergeltung
Vergeltung's picture

love it, "Lieborgate".  :)


Wed, 02/15/2012 - 15:53 | 2163099 grid-b-gone
grid-b-gone's picture

Libortion - cutting the ties between big banks and my capital.

There are 7,000 U.S. banks and only five are really bad. Those are the five least likely to be dealt with.

Wed, 02/15/2012 - 15:03 | 2162874 Omen IV
Omen IV's picture

fraud is a government sanctioned business tool and the only tool in the bag left... to really make banks money !

Wed, 02/15/2012 - 15:06 | 2162890 RopeADope
RopeADope's picture

Regurgitating an August 25th 2011 headline or is there a new development?

Wed, 02/15/2012 - 15:18 | 2162948 Tyler Durden
Tyler Durden's picture

Back then there was no incremental proof of TIBOR, LIBOR and other explicit "fixings" such as the emails presented in last week's post. This is merely a hint to other "victims" to enjoin Schwab.

Wed, 02/15/2012 - 15:16 | 2162933 surf0766
surf0766's picture

How long has the alleged manipulation to have been going on? I see it


Wed, 02/15/2012 - 17:06 | 2163453 dogbreath
dogbreath's picture

Didn't  N.M. Redshield pull out of liebor a while back  maybe 2007 ish

Wed, 02/15/2012 - 15:22 | 2162959 AC_Doctor
AC_Doctor's picture

Hit the scammers where it hurts-in the pocketbooks & buy and hold physical precious metals to protect your wealth.


Wed, 02/15/2012 - 15:32 | 2162999 mayhem_korner
mayhem_korner's picture



"Avalanche" is proof positive that anything can be verbed.

Wed, 02/15/2012 - 21:15 | 2164299 StychoKiller
StychoKiller's picture

Bah, verbogeny is one of many pleasurettes afforded a creatific thinkerizer.

Wed, 02/15/2012 - 15:41 | 2163039 tony bonn
tony bonn's picture

it would be nice to think that lawsuits would burgeon forth as greenshoots on a newly qeed turf, but if you witnessed the fake settlement of the robosigning crimes, and still think that these lawsuits are going anywhere, you have had one too many rides on a skittle shitting unicorn....

Wed, 02/15/2012 - 15:41 | 2163040 machineh
machineh's picture

Schwab owns a bank itself, so it has an insider view of the shenanigans committed by its TBTF peers.

Go Schwab -- may LIEborgate be the asteroid that kills the TBTF dinosaurs dead!

Wed, 02/15/2012 - 15:52 | 2163096 Bansters-in-my-...
Bansters-in-my- feces's picture

Prove all you want.

Different laws for these criminals at the top.

You would need a Department of Justice for that.

Not gonna happen.

Wed, 02/15/2012 - 22:52 | 2164601 billybobtx
billybobtx's picture

Agree with you this time, Oblieblie wants a green market for his campaign, and market manipulation will not stand in his way.

Wed, 02/15/2012 - 15:55 | 2163106 SILVERGEDDON

Banks are proven to be packing every one's fudge once again. Meh. Old news. What's Snookie up to ? Are those tits real ? 'Cause nothing else on the show is. Just sayin'.

Wed, 02/15/2012 - 16:20 | 2163226 Alienated Serf
Alienated Serf's picture

This is going to be good stuff.  Stay tuned!!

Wed, 02/15/2012 - 16:34 | 2163291 Canucklehead
Canucklehead's picture

That HSBC monicker just keeps popping up in the news...


Wed, 02/15/2012 - 16:42 | 2163332 Tic tock
Tic tock's picture

if Libor is tarnished, what happens to the Eurodollar market? -anyone?

Wed, 02/15/2012 - 17:05 | 2163439 gina distrusts gov
gina distrusts gov's picture

There were mortgages issued with Libor as the controlling factor on the interest rate

This could get really interesting if the "investors " pick up on this

Wed, 02/15/2012 - 17:08 | 2163464 Citxmech
Citxmech's picture

Damn - student loans are tied to LIBOR too - It'll be interesting to see whose army can muster the most support.

Wed, 02/15/2012 - 17:27 | 2163547 Scalaris
Scalaris's picture


Inter-Alpha bukkake time.

Wed, 02/15/2012 - 17:27 | 2163553 BlackVoid
BlackVoid's picture

Suing the bank cartel, ROFL.

Better commit suicide now, that is less painful.

Seriously, this will get nowhere fast.

Wed, 02/15/2012 - 17:55 | 2163687 Tunga
Tunga's picture

If Hillary Clinton gets to be head of the World Bank it will be be awesome. She can do things that Ben Franklin used to do. Like invent countries n' stuff. Plus she's gay so nobody could blackmail her. The future is going to be so cool. 

Wed, 02/15/2012 - 19:23 | 2163973 swani
swani's picture

I fucking love it. Could the MF Global scandal have woken up the broker dealers to start taking action in order to prevent their own demise at the hands of thes Too Big To Jail banks? This lawsuit will obviously be the first of many.

Hopefully, everyone, every victim, will start or join a lawsuit. I would like to see class actions everywhere- all Americans have been victims of this widescale financial fraud.

This may get nowhere, but the corruption will be well documented and the more it's documented, the more the world becomes aware of how deep it runs. The more the mainstream media fails to report the corruption, the more the world becomes aware of the media's complicity. This awareness among the citizenry is the beginning of something much bigger, the rest will follow, it always does. 

Wed, 02/15/2012 - 22:12 | 2164476 Bringin It
Bringin It's picture

Too Big To Jail - I like that.

Thu, 02/16/2012 - 16:32 | 2167063 limabean_esquire
limabean_esquire's picture

So basically, LIBOR should have been set higher.  This was a boon to anyone with an adjustable mortgage and a drain to whom?  Large investors in Floating Rate Notes? 

So, beyond the gnashing of teeth about TBTF banks and blah blah blah, why exactly do we want higher LIBOR fixings....anyone?   

The BBA panel banks are asked where they could borrow unsecured funds if they needed to. The answers are tallied, highs and lows dropped, and an average rate is calculated.    Banks don't set rates higher because if they did the world would view them as sh1t credits.   Given the status of your average american,  we need lower LIBORS not higher.

Tue, 07/03/2012 - 08:21 | 2583189 Sandy15
Sandy15's picture

I financed commercial property using Libor.  When it went in my favor, Wachovia AKA Wells fargo, wouldn't cash out to give me my money.  Then they claimed it went against me, I had to pay approx 150K to get out of the loan.  Think I'll be filling my own lawsuit soon.  Should get my 150K back plus some since I would have made 200K plus on the investment.

Wed, 07/04/2012 - 14:12 | 2587183 monad
monad's picture

Arm all the old people who were totally wiped out. Give them the good stuff. Do it now.

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