By Aruna Viswanatha
Two former Deutsche Bank AG traders face criminal charges for allegedly trying to manipulate the Libor benchmark interest rate, including the first U.S. trader to be charged in connection with the yearslong probe.
Matthew Connolly, 51 years old, former head of the bank's pool trading desk in New York, and Gavin Campbell Black, 46, a former derivatives trader in London, were accused of trying to rig the London interbank offered rate, an interest-rate benchmark, between 2005 and 2011 to benefit the bank's trading positions, according to an indictment unsealed on Thursday.
Mr. Connolly, who was taken into custody on Thursday, according to the Justice Department, is the first U.S. trader to be charged in the case; others have been charged in the U.K.
Deutsche Bank declined to comment.
A third former Deutsche Bank trader, Michael Curtler, who supervised Mr. Black, pleaded guilty in October 2015. The bank paid $2.5 billion to resolve related criminal and civil charges against it in April 2015.
U.S. prosecutors have charged more than a dozen traders and other bank employees with trying to manipulate Libor, including traders in London and elsewhere. To date, four have pleaded guilty, including Mr. Curtler, and two others were convicted at trial.
Messrs. Connolly and Black face nine counts of wire fraud and one count of conspiring to commit wire and bank fraud. Lawyers for the men couldn't immediately be located for comment.
"Manipulation of these rates undermines the integrity of our financial system," said Leslie Caldwell, who runs the Justice Department's criminal division.
Libor is used as a reference to set interest rates on trillions of dollars in financial products, including mortgages and derivatives. It is set by a panel of banks that indicate daily how much it would cost them to borrow money.
A sprawling, international investigation has led more than a half-dozen banks to pay billions of dollars to settle related charges, including Citigroup Inc., which last week paid $175 million to end a civil probe. Citigroup also paid an additional $250 million to resolve similar claims involving a different benchmark.
The cases are largely based on instant messages exchanged between traders and the bank employees responsible for making the bank's daily submission to the group that calculates the rate.
In one 2005 exchange cited in the indictment, Mr. Black asked a colleague who would make Deutsche Bank's daily submission: "COULD WE PLS HAVE A LOW 6MTH FIX TODAY, OLD BEAN?"
According to the indictment, in another exchange from 2007, Mr. Connolly asked the same person: "If possible, we need in NY 1mo Libor as low as possible next few days...tons of pays coming up overall...thanks!" Mr. Connolly later responded after the submitter complied: "Thanks...you are the man!"
"[T]he defendants and their co-conspirators knew and foresaw that Deutsche Bank had counterparties in the United States which had taken financial positions that would be negatively affected by the scheme," the indictment said.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com
Corrections & Amplifications
This item was corrected at 5:07 p.m. ET to show that Matthew Connolly is the first American trader to be charged by U.S. authorities in connection with the Libor investigation; others have been charged in the U.K. The original incorrectly omitted mention of the U.K. charges.