Eurodollar Traders May Add Barclays, Rabobank Libor Claims

Jun 23, 2014 8:27 pm ET

(Updates with judge’s determination in third paragraph.)

June 23 (Bloomberg) -- Investment funds that traded in Eurodollar futures and accused banks of manipulating Libor can revise their lawsuit to add allegations that Barclays Plc and Rabobank Group used the benchmark rate to gain trading advantages.

U.S. District Judge Naomi Reice Buchwald in Manhattan today granted the request to add claims to the funds’ lawsuit, which also alleges that other banks including Bank of America Corp. artificially suppressed the interest rate to hide increasing borrowing costs. Buchwald also dismissed Societe Generale SA as a defendant, finding allegations against that bank were filed too late.

“Put simply, plaintiffs may plead that they either paid too much for Eurodollar futures contracts on certain dates or earned too little by selling them,” Buchwald said in her opinion.

The lawsuit is among more than two dozen interrelated cases before the judge alleging that banks conspired to depress the London interbank offered rate, a measure of banks’ borrowing costs used as a reference point for trillions of dollars in financial instruments. Buchwald dismissed federal antitrust and racketeering claims brought by plaintiffs in the cases in March 2013.

By understating Libor, banks provided a “false or misleading impression of their financial strength to investors and the rest of the market,” the Eurodollar futures traders said in a complaint filed in April 2012.

‘Many Hurdles’

Buchwald said in today’s ruling that the traders “still face many hurdles,” including demonstrating “they actually sustained damages as a result of defendants’ improper conduct.”

Global authorities have been investigating claims that more than a dozen banks altered submissions used to set benchmarks such as Libor to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.

Barclays agreed to pay 290 million pounds ($441 million) and Royal Bank of Scotland Group Plc paid $612 million to U.S. and U.K. regulators to resolve claims. UBS AG agreed to pay 1.4 billion Swiss francs ($1.47 billion). Rabobank agreed to pay more than $1 billion in penalties to U.S. and European regulators.

“We look forward to prosecuting the trader-based claims against Barclays and Rabobank and, if there’s other evidence that arises, against other banks as well,” said David Kovel, a lawyer for the Eurodollar futures traders.

Lynne Burns, a spokeswoman for Rabobank, and Barclays spokesman Jon Laycock, didn’t immediately respond to e-mails seeking comment on the ruling.

The consolidated case is In re Libor-Based Financial Instruments Antitrust Litigation, 11-MD-02262, U.S. District Court, Southern District of New York (Manhattan).