February 28, 2014 3:07 pm

SFO probes former US Barclays traders for alleged Libor rigging

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Three former Barclays traders based in New York are under investigation by the UK’s Serious Fraud Office as part of its probe into the alleged rigging of Libor and could face criminal charges over the coming weeks.

Jay Merchant, the bank’s former director of dollar fixed-income swaps, Alex Pabon, who was in Mr Merchant’s team, and Ryan Reich, also a former dollar interest-rate derivative trader, have all been notified of the SFO’s investigation, according to two people familiar with the case.

No charging decision has been made although one is expected over the coming weeks after the completion of SFO interviews.

Mr Reich attended an interview under caution at the SFO in London this month, while Mr Merchant is due to attend a similar interview.

Mr Pabon has remained in the US, the people said.

Lawyers for Mr Pabon and Mr Reich declined to comment. Mr Merchant’s lawyer did not immediately respond to an email seeking comment.

The SFO declined to comment.

Mr Merchant left Barclays in 2009 and worked at UBS as head of swaps trading in New York. He left UBS in 2012.

Mr Pabon and Mr Reich have also left the bank, with Mr Reich most recently working as a hedge fund manager.

If they are charged, one concern for the SFO would be if they could reasonably expect to extradite them from the US.

The US Department of Justice has charged five UK citizens in its own parallel, and sometimes competing, Libor probe. None have been extradited or given an opportunity to respond officially to the US charges.

They include Tom Hayes, a former yen derivatives trader at UBS and Citigroup whom the SFO has also charged with conspiracy to defraud. He denies the charges and will face a jury in January.

In depth

Libor scandal

Analysis BIG PAGE Libor pfeatures

Regulators across the globe probe alleged manipulation by US and European banks of the London interbank offered rate and other key benchmark lending rates

The investigation into Mr Merchant, Mr Reich and Mr Pabon, meanwhile, is part of another strand of the Libor investigation concentrating on whether the dollar-denominated Libor rate was manipulated.

The SFO made its first charges as part of that probe earlier this month against three former bank employees who worked in Barclays’ London headquarters. They have not formally entered a plea to the charges.

They are accused by the SFO of entering into “a dishonest agreement with Barclays derivative traders in New York, submitting false and misleading Libor rates”.

With additional reporting by Kara Scannell in New York

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