All the convictions in the U.S. for Libor manipulation have now been overturned.

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After the Great Recession back in 2008, there was great hue and cry demanding that hundreds of bankers be thrown in prison, every one of them to spend the remainder of their life in a dank, dark dungeon.

Nice concept.

Has a good, solid, rewarding emotional feel. Just the thought all those horrible bankers in jail gives you a warm fuzzy feeling all over.

The only problem is for that to happen, federal prosecutors have to actually, you know, prove their case.

Little teeny, tiny problem standing in the way – – proving manipulation is difficult.

So difficult that all convictions for alleged LIBOR manipulation in the United States have now been overturned.

So much for throwing all the bankers in jail.

The core challenge is proving one specific individual committed a specific crime. A particular bank as a whole may have committed crimes, which can be proved. A department overall can be shown to have committed a crime. The challenge is to prove one specific guy over there, yeah that one, had intent to and did violate a specific criminal code.

Wall Street Journal – 1/27/22 – All US Trial Convictions and Crisis-Era LIBOR Rigging Have Now Been Overturned – Three traders from Deutsche Bank were convicted at trial in 2018 for manipulating LIBOR. The charges were wire fraud, which is exquisitely broad.

The Second Circuit Court of Appeals reversed the convictions.

Along with the reversal in the article discussed next, that means all of the trials in the U.S. claiming LIBOR manipulation have been overturned. The feds have not been able to prove at trial any case over LIBOR manipulation and have the case withstand judicial review on appeal.

At issue in this case is the nature of the LIBOR rate. Article points out LIBOR is not based on actual transactions. It is not some weighted average of what a bunch of banks really paid on their LIBOR trades. Instead, it is based on each bank estimating the rate they could borrow in the next transaction. That makes those rates reported by banks a hypothetical, not an actual. If a trader thinks that he could get a particular rate, or if it is possible that the bank could get that rate, then it is not a false statement.

And if there is no false statement there cannot be wire fraud. Thus the appeals court overturned the conviction.

There are a number of guilty pleas in United States, article says a grant total of six, count ’em six. (Not hundreds and hundred, but merely six.)

Those six guilty pleas will stand. However, every conviction for LIBOR manipulation has now been overturned.

Wall Street Journal – 7/19/17 – Appeals Court Overturns Convictions of Two Ex-Rabobank Traders in LIBOR Scandal – Yes, this article is from five years ago.

The Second Circuit Court of Appeals reversed the convictions of two bankers working for Rabobank. In 11/15 they were convicted at trial of wire fraud for allegedly manipulating LIBOR.

Problem with this prosecution is one of the witnesses against the bankers reviewed testimony the bankers were forced to give to UK regulators.

Coerced testimony is a violation of the Fifth Amendment to the U.S. Constitution. The appellate court ruled it is not clear whether the prosecution would have prevailed without the Fifth Amendment violation, thus the convictions were overturned.

In light of flagrant, massive violations of the First Amendment to the United States Constitution over the last two years, it is a refreshing reminder that another appeals courts in the distant past (five years ago) was actually able to read the Constitution.

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