Back in 2012 we introduced readers to Christian Bittar, a former prop trader at Deutsche Bank who profited handsomely by betting on the direction of rates he conspired with others to manipulate (recall that when it comes to betting on the direction of rates, it’s much easier to make winning trades when you collude with colleagues to fix the benchmark). Readers may also recall that via a bit of digging which began with the LinkedIn profile of someone else named Christian Bittar, we were soon tossed down the Lieborgate rabbit hole only to find that on the other end was the secretive world of Swiss hedge funds and private banks.
We later detailed how Deutsche Bank went about ridding itself of Bittar who was once one of the firm’s most well-paid traders and concluded with the following six point assessment:
- Deutsche tells an internal prop trader to invest billions in the Libor market,but tells him: "do everything legally and by the book or else."
- Bittar colludes with virtually everyone else under the sun to generate billions in profits;
- Bittar makes tens if not hundreds of millions of bonuses for himself;
- Finally, DB no longer can hide the deception and claws back a portion of Bittar's bonuses, while washing its hands of the full affair;
- Scapegoat punished, life goes on.
- He went to work for Bluecrest Capital Management LLP, Europe’s third- biggest hedge fund with $30 billion under management.
Fast forward a few years and Deutsche Bank has just been saddled with a $2.5 billion fine for its contribution to the worldwide manipulation of benchmark rates and thanks to the now-public e-mails used by the Justice Department to make its case, we know exactly what Christian said on the way to influencing the fixings. Here’s Bloomberg:
Identified only as Trader Three by the U.S. Department of Justice, he was Deutsche Bank’s most profitable derivatives trader, earning a bonus of almost 90 million pounds ($136 million) in 2008 alone. He was responsible for the majority of the requests for skewed Euribor submissions, the U.S. Commodity Futures Trading Commission said Thursday.
That trader is Christian Bittar, according to two people with knowledge of the situation, who asked not to be identified because they weren’t authorized to speak publicly…
Trader Three worked in concert with colleagues in Frankfurt and as many as six counterparts at other firms, seeking to manipulate the rate to boost the profitability of his positions, according to the Justice Department. Sometimes he allegedly worked against the interests of others at his own firm if it benefited his trading book.
“My cash desk will be against us so we’ll have to do some lobbying,” he told a derivatives dealer at a rival bank in a Sept. 7, 2006, message released by the Justice Department. He noted Royal Bank of Scotland Group Plc and UBS Group AG also were likely to be “against” and promised to contact a trader at an additional firm.
“ok we have to fight hard,” the rival bank dealer replied.
Trader Three’s relationship with his counterpart at that bank didn’t stop him from on occasion submitting rates that would hurt it.
“LETS TAKE THEM ON !!” he said in a Sept. 21, 2005, message to an rate-submitter at Deutsche Bank, according to the bank’s settlement with the New York Department of Financial Services, which described Bittar by his title. The rival bank “IS DOIN IT ON PURPOSE BECAUSE THEY HAVE THE EXACT OPPOSITE POSITION.”
“Ok, let’s see if we can hurt them a little bit more then,” the submitter replied.
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Nothing wrong with that. Just a couple of friends conspiring to manipulate the benchmark rates on which trillions in mortgages and nearly every other kind of loan imaginable are based for personal gain.
If only someone had warned the world about this more than six years ago…