London Court Sentences Two Former Traders for Euribor Manipulation

What happened?

On 19 July 2018, as a result of a prosecution brought by the Serious Fraud Office (SFO), a London court sentenced two former traders, Phillipe Moryoussef and Christian Bittar, to eight years and five years in prison for conspiracy to defraud by manipulation of the ‘Euribor’ interest rate benchmark. It follows similar convictions in relation to ‘Libor’ manipulation in 2015 and 2016.

The traders were accused of conspiring to manipulate Euribor by convincing ‘submitters’ in their respective banks to submit higher or lower Euribor rates to favour their trading positions. Moryoussef also communicated with submitters at other banks and warned colleagues in instant messages and emails to keep quiet about the misconduct.

The European Commission had previously fined banks involved a total of EUR 1.31 billion between 2013 and 2016. Similarly, the UK Financial Conduct Authority (FCA) imposed fines totalling GBP 446.5 million on banks for, inter alia, Euribor-related misconduct.

The SFO’s prosecution of other individuals in the same process was less successful: nine other individuals were charged with similar offences: one was acquitted; the jury was unable to reach a verdict regarding three individuals; and the SFO’s requests to Germany and France, to extradite five other individuals, were refused.

Why does this matter?

The eight and five year prison sentences follow the SFO’s successful Libor probe, which secured convictions against five individuals and total custodial sentences in excess of 30 years. The sentences are a reminder for bank employees of the serious consequences of financial misconduct.

It also shows the willingness of UK authorities to prosecute financial misconduct in the UK criminal courts, in spite of the challenges that such cases inevitably pose where there are complex fact patterns.

The SFO’s Euribor probe is also a reminder that investigations into suspected misconduct in the financial services sector can proliferate, leading to financial regulatory, antitrust and criminal investigations, as well as private litigation.

What happens next?

One of the convicted traders, Phillipe Moryoussef, left for France before the start of proceedings and was therefore tried in absentia. The SFO has signalled its intention to issue an international arrest warrant and secure his extradition. The former trader has stated that he intends to appeal the case against him before the European Court of Human Rights.

The SFO is also planning a retrial of the three individuals for whom no verdict was returned. 

Beyond the criminal prosecution of these individuals, banks involved in the misconduct face a UK contractual claim for fraudulent misrepresentation related to Euribor-based swap contracts (Marme Inversiones 2007 S.L. v The Royal Bank of Scotland Plc and others). This case follows similar UK litigation linked to the manipulation of Libor, including an antitrust claim (FDIC v. Barclays and others). Additional claims relating to Euribor manipulation may now inevitably follow. 

How can Cadwalader help? 

Cadwalader’s antitrust team is one of only a few to focus on the financial services sector. We regularly represent companies before the EU, UK and US antitrust authorities, and are specialists in offering ‘end-to-end’ advice on antitrust investigations and related litigation in this sector, working closely with our financial regulatory and white collar colleagues. 

If you would like to discuss the issues arising in this alert, or how we can help you more generally, please contact Vincent Brophy and Tom Bainbridge.

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