A 30-year-old former Barclays swaps trader in New York, who was fired from the bank in 2010, is among those drawing scrutiny from prosecutors in the deepening scandal over the manipulation of global benchmark interest rates.
US prosecutors in Washington, DC looking at Ryan Reich's activities while at Barclays between August 2006 and March 2010, said several people familiar with the situation, who declined to be identified because the bid-rigging investigation is ongoing.
Reich, now a portfolio manager with New York-based hedge fund WCG Management, was dismissed from Barclays for allegedly sending inappropriate emails seeking internal bank information, according to two sources familiar with the situation.
One of those sources, who used to work for the bank, said the information Reich sought concerned how the Libor benchmark rate was going to be priced, information that could have been useful for his trading positions.
Reached by telephone on Friday, Reich declined to comment. A spokeswoman at the U.S. Department of Justice did not return phone calls or emails seeking comment.
Libor, the London interbank offered rate, is used to set rates on trillions of dollars of contracts for everything from home mortgages to credit cards. The investigation has embroiled banks on both sides of the Atlantic and involves yen and euro rates as well as those for the dollar.
Lawyers familiar with the investigation say federal prosecutors continue to reach out to individuals to gauge interest in cooperating or taking pleas. They said prosecutors are expected to begin making decisions on charging individuals late this month or in early September.
Indeed, many of the traders under scrutiny do not believe they did anything wrong because their employers and regulators had some awareness of their activities, the lawyers said. Information released by the New York Fed shows that bank regulators in the United States and Europe knew some banks were submitting low Libor bids during the financial crisis to make institutions appear healthier than they were.
A person familiar with Reich's dismissal from Barclays said that the young trader, who joined Barclays just two years after graduating from Princeton University, was directed by his supervisors to send the emails and they were aware of everything he was doing.
The person, who did not want to be identified, said the practice of sending emails to gather information on future Libor pricing went back to the 1990s at Barclays, long before Reich joined the firm.
"This was systemic at Barclays," said the person.
Barclays declined to comment.
Reich was a part of a low-profile New York trading desk at Barclays that is now increasingly in focus as prosecutors and regulators extend their investigation of the Libor scandal, which began to come to light in 2008. In June, Barclays paid a $453 million penalty to authorities in t he United States and the UK to settle allegations some of its traders colluded with people at other banks to manipulate Libor.
In the United States, federal authorities and regulators are focusing on the activities of the Barclays desk on which Reich worked. It traded U.S. Treasury and U.S. dollar and Canadian dollar interest rate swaps.
Reuters previously reported that Jay Merchant, one of that desk's top traders, who in 2009 served as head of U.S. dollar swaps trading, is being scrutinized by federal authorities as well. Merchant moved to UBS in late 2009 to run that firm's swaps desk.
Ritankar "Ronti" Pal, who Merchant reported to and who had overseen all of the desk's trading since 2006, recently left Barclays, according to people familiar with the matter. A man who appeared at an address listed for Pal declined comment and called for building security to escort a reporter away. Pal didn't respond to a written request for comment.
The Libor investigation is focusing on allegations that traders at various banks colluded to try and rig the price of Libor to impact the interest rate on swaps, a type of derivative contract. On many swaps, the interest paid is a floating rate, so depending on which side a bank sat on a trade it would have an interest in getting either a lower or higher Libor rate.
One thing authorities are looking into is whether traders at banks were trying to get information ahead of time to know where Libor was going to be set for the next day, or work with other traders to influence the rate.
As reported last week by Reuters, people familiar with the investigation said authorities are looking at whether some individuals on the Barclay's trading desk tried to influence the rate on Libor by communicating with other traders in London to get a higher return on certain swaps the desk was trading.
Traders at JPMorgan Chase & Co also had dealings with some of the Barclays traders under scrutiny, according to a person familiar with the investigation. JPMorgan declined to comment.
Reich filed an employment arbitration case against Barclays following his dismissal. The case was eventually resolved, though terms were not disclosed.
Another lawyer familiar with the investigation said prosecutors could charge traders with wire fraud, a charge that does not require them to actually have succeeded in manipulating Libor, but merely have sought to do it. Wire fraud is often used when individuals communicate through emails or cell phones as part of a conspiracy charge.
Reich's current employer, WCG Management, is a macro hedge fund that specializes in trading bonds, currencies and interest rate swaps. It oversees $3.4 billion in assets and is led by Barry Wittlin, a former top proprietary trader with Merrill Lynch.
Officials at WCG did not respond to a request for comment.
People familiar with the investigation said there is no indication authorities are looking at the hedge fund and authorities are not looking at any of Reich's activities at the fund.
Updated Date: Dec 20, 2014 10:56 AM