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The Morning Risk Report: All U.S. Trial Convictions in Crisis-Era Libor Rigging Have Now Been Overturned
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Good morning. A federal appeals court reversed the convictions of two former Deutsche Bank AG traders found guilty of rigging a global lending benchmark, overturning one of the U.S. government’s highest-profile court victories linked to the 2008 financial crisis.
The decision Thursday dealt a blow to the legacy of an investigation that Washington poured resources into after the financial crisis, when prosecutors were criticized for not pursuing enough cases against individual traders and executives. The cases focused on how traders and brokers world-wide influenced the daily London interbank offered rate, known as Libor, which helped set the value of lucrative derivatives they traded and made banks appear healthier.
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Thursday’s reversal shows how difficult it has been for prosecutors to use broadly written antifraud laws to punish traders operating in sophisticated markets where standards of conduct weren’t always clear. A panel of the U.S. Court of Appeals for the Second Circuit found evidence used to convict Matthew Connolly and Gavin Black wasn’t enough to stand up fraud and conspiracy charges. A jury in New York had convicted the two men in 2018.
The Manhattan-based appeals court in 2017 also tossed Libor-related verdicts against two traders who had worked at Rabobank Group.
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From Risk & Compliance Journal
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DOJ Promises Robust Antibribery Enforcement Despite Dip in Cases
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The U.S. Justice Department’s enforcement of a key antibribery law appeared to ebb last year, with prosecutors levying fines against only three companies for violations of the Foreign Corrupt Practices Act.
However, a senior Justice Department official is seeking to dispel the notion that prosecutors have taken their foot off the pedal.
“I wouldn’t over read or really read much into the numbers of prosecutions in a given year,” said Nicholas McQuaid, who serves as principal deputy of the department’s criminal division.
“We have what we view as a very robust pipeline,” he said. “I would expect to see some significant resolutions in the next year.”
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Arif Naqvi at the World Economic Forum in Davos, Switzerland, in January 2017. PHOTO: RUBEN SPRICH/REUTERS
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A Dubai regulator fined Abraaj Group’s founder Arif Naqvi $135.5 million, saying he deceived investors and misused funds, four years after the private-equity firm’s collapse raised questions about governance in the Middle East financial hub.
The Dubai Financial Services Authority said Thursday it was also barring Mr. Naqvi from performing any function in the financial center it oversees.
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Robinhood Markets Inc. has scored another victory in its legal battles with customers upset about the brokerage’s handling of last year’s meme-stock trading frenzy.
A federal judge rejected a lawsuit filed by investors who lost money when the brokerage blocked the ability to purchase shares of GameStop Corp., AMC Entertainment Holdings Inc. and other hot stocks on Jan. 28, 2021. The suit accused Robinhood of negligence and breaching various duties to its customers.
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Private-fund managers sometimes give investors misleading information about fees and performance, said the Securities and Exchange Commission, which highlighted several types of violations found by examiners as the regulator considers stronger rules for private-equity and hedge-fund managers.
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President Biden praised retiring Supreme Court Justice Stephen Breyer as a model public servant Thursday and reaffirmed his commitment to nominate a Black woman to fill his seat, pledging to make an announcement before the end of February.
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Adult-film actress Stormy Daniels squared off with her former lawyer Michael Avenatti in federal court Thursday, accusing him of stealing hundreds of thousands of dollars as he sought to undermine her credibility by referencing her paranormal beliefs.
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Chinese Foreign Minister Wang Yi says regional security can’t be boosted by strengthening military blocs. PHOTO: JI CHUNPENG/ZUMA PRESS
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Days before Russian President Vladimir Putin arrives in Beijing for a summit meeting with leader Xi Jinping, China warned the U.S. and its allies not to “hype up the crisis” around Ukraine, where Russia has amassed tens of thousands of troops along the border.
Chinese Foreign Minister Wang Yi told U.S. Secretary of State Antony Blinken during a phone call that all parties should “remain calm and refrain from doing things that stimulate tension,” according to a statement published Thursday Beijing time by China’s Foreign Ministry.
Related:
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The cost of hiring new employees and retaining existing ones in the nation’s tight labor market is growing at nearly its fastest pace in a generation. That is helping to fuel inflation as employers pass labor costs to customers.
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The European Union hit back against China’s targeting of one of the bloc’s smallest members over its ties to Taiwan, opening a new front in the global battle over Beijing’s use of economic pressure to advance political objectives.
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The United Arab Emirates is at the leading edge of an effort in the Arab world to bring Syria in from the cold. Government officials and business executives from the U.A.E. and Syria say the oil-rich state is attempting to normalize a closer relationship with Bashar al-Assad’s regime.
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Employees at a retail store in Kyiv, Ukraine, read a ransomware demand related to the NotPetya hack in June 2017. PHOTO: VINCENT MUNDY/BLOOMBERG NEWS
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Some insurance companies cited “act of war” exclusions to try to avoid covering the damage of a Russian cyberattack against Ukraine in 2017 that rippled outward internationally, causing billions of dollars in damage. Now, as U.S. officials warn of similar hacks, insurers might not be able to invoke that protection.
A New Jersey judge last month said such clauses covered “traditional” war—physical, not cyber, activity. The decision, which came more than three years into a legal battle between pharmaceutical giant Merck & Co. and its property insurers, could have implications for who foots the bill for digital fallout from potential Russian cyberattacks against Ukraine in the present conflict.
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New Jersey-based Becton Dickinson held its annual shareholders meeting virtually on Tuesday. PHOTO: SMITH COLLECTION/GADO/GETTY IMAGES
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