Proposed exchange CEO Kengeter was viewed as possible Libor co-conspirator

Carsten Kengeter is on track to run Europe’s largest stock exchange. Three years ago, British prosecutors viewed him as a possible co-conspirator in the global interest-rate-rigging scandal.

Carsten Kengeter speaks during the Sueddeutsche Zeitung finance day conference in Frankfurt in 2016

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Kengeter speaks during the Sueddeutsche Zeitung finance day conference in Frankfurt in 2016

Kengeter is chief executive of Deutsche Börse, the German exchange that is in talks to merge with London Stock Exchange Group. Under terms of the planned merger, Kengeter would become CEO of the combined company, which will be based in London.

In early 2013, the UK’s Serious Fraud Office was building criminal cases against traders and brokers allegedly involved in manipulating the London interbank offered rate, or Libor. The SFO’s investigation was focused in part on officials at Swiss bank UBS, where Kengeter had until recently been a senior executive, SFO officials have publicly said.

Tom Hayes, a former UBS and Citigroup trader, was cooperating with the SFO’s investigation. In March 2013, the SFO presented Hayes’s lawyers with a draft cooperation agreement that described the fraud charges that the agency planned to file against the former trader and listed his alleged co-conspirators, according to a copy of that agreement reviewed by The Wall Street Journal.

Among those was Kengeter. The document said he and others at UBS had conspired with Hayes “dishonestly to manipulate Libor and other interbank offered rates, by procuring the submission of rates with the intention that the economic interest of others would be prejudiced and/or to make personal gain for themselves or another.”

Kengeter, 48 years old, was never accused of wrongdoing in connection with Libor manipulation, nor was he listed as a co-conspirator in court filings. The names of Hayes’s alleged co-conspirators were removed from the final version of the cooperation agreement, according to a copy of that final agreement. A jury convicted Hayes in August on eight fraud-related counts, and he is serving an 11-year prison sentence. Hayes has maintained that many other traders and bank officials were involved in rate-rigging.

Six of Hayes’s former brokers were charged as his co-conspirators, but a London jury acquitted them earlier this year.

Kengeter didn’t respond to requests for comment. In an emailed statement to The Wall Street Journal, a spokesman for Deutsche Börse said all investigations conducted both internally at UBS and by independent third parties, as well as all investigations by the authorities, identified no reasonable grounds for accusing Kengeter of any wrongdoing. LSE and the SFO, as well as UBS, declined to comment

Kengeter, a burly German with a passion for extreme sports such as ski racing, arrived at UBS in 2008 after being a partner at Goldman Sachs. He was co-head of UBS’s investment bank during some of the time that Hayes worked in the company’s Tokyo office from 2006 through 2009. Kengeter later became head of a UBS unit charged with disposing of unwanted assets. He left the bank in February 2013. Two months earlier, UBS agreed to pay $ 1.5 billion to settle US and British rate-rigging charges, and Hayes was charged in the US and arrested in the UK UBS declined to comment on Kengeter or his time at the firm.

Kengeter became Deutsche Börse’s CEO in June 2015. Last month, Deutsche Börse and the London Stock Exchange announced that they were in advanced merger talks. Other exchanges, including Intercontinental Exchange, are also considering bids for LSE. Under UK takeover rules, Deutsche Börse has until March 22 to make a formal offer for LSE or it must move on. ICE has until March 29.

The SFO focused on Kengeter as a potential alleged co-conspirator after reviewing troves of internal UBS communications and spending several days interviewing Hayes, according to SFO documents reviewed by The Wall Street Journal.

Kengeter was one of Hayes’s staunchest advocates at the bank, according to testimony Hayes gave to the SFO. When Hayes threatened to jump to rivals, Kengeter played a leading role convincing him to stay, in part by dangling more money, according to internal UBS documents and people familiar with the matter.

“I told him…that he should get on with making money so I can pay him more,” Kengeter emailed Hayes’s boss at the time, according to a document reviewed by the Journal. Kengeter was also included on an email in which Hayes’s boss cited the trader’s “invaluable” connection to Libor-setters in London.

Hayes told SFO investigators that when Kengeter came to Tokyo to visit UBS’s offices, he participated in 11 a.m. meetings where Hayes and his colleagues routinely discussed their plans to nudge Libor up or down to suit their trading positions, according to transcripts of some of Hayes’s interviews. The informal meetings, which usually lasted about 15 minutes, took place on the trading-room floor, and Hayes told the SFO that he remembered seeing Kengeter in the huddle on multiple occasions.

Hayes also told the SFO that Kengeter was on a conference call during which an executive in Tokyo expressed his frustration that UBS colleagues weren’t fully cooperating with Hayes’s requests to move the bank’s Libor submission in helpful directions, according to the transcript of Hayes’s interviews with the SFO.


On at least one occasion, Hayes said, Kengeter emailed him to ask why he was wagering so much on Libor moving up. “We’re confident that it’s going to stay higher,” Hayes told the SFO that he responded. Hayes said that he offered to reduce the size of his positions but that Kengeter said he didn’t need to.

“My mind boggles that these people like Carsten” haven’t been blamed, Hayes told the SFO. “Of course they knew about it…It was so open and prevalent.”

Hayes acknowledged, though, that it was possible that Kengeter didn’t understand the specific manner in which the traders intended to move Libor.

While some of Hayes’s statements about Kengeter to the SFO were disclosed at trial, it has never been reported that the SFO at one point considered Kengeter to be a potential co-conspirator.

Kengeter’s connection to the Libor scandal was discussed during negotiations with LSE, according to a person familiar with the matter. But the issue never became a key focus of the discussions because it was viewed as being in Kengeter’s past, the person said.

Write to David Enrich at and Shayndi Raice at

This article was published by The Wall Street Journal

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