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Deutsche Bank whistleblower receives $ 200 million bounty for Libor misconduct tip

A whistleblower whose information helped US and UK regulators investigate Deutsche Bank’s manipulation of benchmark global interest rates AG

received nearly $ 200 million for helping the investigation, according to people familiar with the matter.

The payment is the largest ever made by the Commodity Futures Trading Commission, which, along with the UK’s Department of Justice and Financial Conduct Authority, settled enforcement actions against Deutsche Bank in 2015.

The CFTC’s announcement did not name the bank or the deal, but the payoff is linked to the bank’s manipulation of the London Interbank Offered Rate and similar widely used benchmarks, people said.

The whistleblower’s request for attribution was initially rejected by the CFTC, but the U.S. derivatives regulator ultimately decided that the individual’s information was useful after the whistleblower submitted a request. review.

“We are very pleased that the CFTC was able to reverse an earlier decision and reverse its thinking,” said David Kovel, managing partner of the law firm Kirby McInerney LLP, who represents the whistleblower. “It says a lot about the people out there that they don’t feel pressured to stick to the wrong decision given the amount at stake.”

The Wall Street Journal previously reported that the former executive provided information that aided the CFTC and Justice Department investigations that led to an estimated $ 2.5 billion in settlements with Deutsche Bank in 2015, including 800 million dollars with the CFTC. They alleged the bank manipulated Libor, a benchmark interest rate used to secure short-term loans for global banks that traders and other bank workers could manipulate because it was based on oral submissions. and not on actual transactions.

“The kind of information he provided was the kind that would be very difficult to come by if you don’t know where to look in a large financial organization, Kovel said.

Libor rigging was profitable for banks and other market participants, as billions of dollars in derivatives known as swaps were priced from movements in the benchmark.

A spokesperson for Deutsche Bank declined to comment.

The prospect of such a large payment has plunged the CFTC’s whistleblower program into turmoil this year, with agency executives saying there was no mechanism to pay the former bank executive and other applicants. and continue to fund the program. The agency avoided a crisis after President Biden signed a bill in July to fund the program.

The CFTC’s investigation had already started by the time the whistleblower approached a separate agency, officials wrote in an order making the award. But the information proved invaluable in interviews authorities conducted as they expanded their investigation, according to the order.

Dawn Stump, Republican commissioner at the CFTC, said in a statement that she did not agree with basing the price in part on a fine imposed by a foreign regulator. Like the CFTC’s announcement, Ms Stump did not name the bank or the underlying case in her statement.

Ms Stump wrote that the CFTC had never previously awarded a tipster based on coercive action by a foreign regulator.

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“I think we need to take a closer look at instances where a whistleblower asks the commission to leverage its limited client protection fund for a reward relating to a foreign authority’s action in the future to remedy any issues. damage outside the United States, ”Ms. Stump said. wrote.

Thursday’s award is the largest ever given to a single person since the Dodd-Frank Financial Review Act of 2010 created the programs to help prevent another massive fraud like Bernie Madoff’s Ponzi scheme.

Last year, the Securities and Exchange Commission paid an informant its largest whistleblower payment, around $ 114 million.

“This shows that the CFTC program, like the SEC program, over the past 10 years has really come of age,” said Mary Inman, whistleblower attorney at law firm Constantine Cannon LLP.

Corrections and amplifications
Last year, the Securities and Exchange Commission paid an informant its largest whistleblower payment, around $ 114 million. An earlier version of this article incorrectly stated that the payment was for two informants. (Corrected October 21)

Write to Mengqi Sun at [email protected] and Dave Michaels at [email protected]

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