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By Nate Raymond
NEW YORK, Sept 30 (Reuters) - Three former Barclays Plc traders facing charges in the United Kingdom overmanipulation of Libor benchmark interest sued the bank in NewYork on Tuesday, accusing it of retaliating against them byfailing to pay their legal fees.
In a lawsuit filed in Manhattan federal court, Alex Pabon,Jay Merchant and Ryan Reich accused Barclays of violatingwhistleblower retaliation protections in the Dodd-Frank Act.
The three U.S. citizens who worked for the bank in New Yorkwere the first individuals to be charged criminally by the UKSerious Fraud Office (SFO) following a global investigation intoalleged rigging of benchmark interest rates. Trial is expectedin 2016, the lawsuit said.
British and U.S. prosecutors have charged severalindividuals and extracted billions of dollars in fines frombanks as part of the manipulation of Libor and related rates.
Libor, which is calculated based on submissions from a panelof banks, underpins hundreds of trillions of dollars oftransactions and is used to set interest rates on credit cards,student loans and mortgages.
Barclays agreed in 2012 to pay $453 million to settleinvestigations by U.S. and British authorities related to Libor.The case prompted wide criticism and led to the resignation ofits chief executive, Bob Diamond.
In April, the SFO charged Merchant, a director of dollarfixed-income swaps, and interest-rate derivative traders AlexPabon and Ryan Reich with conspiring with each other to commitfraud in connection with setting Libor rates.
At that point, Barclays, which had paid the trio's legalbills since 2010 as they met with authorities investigatingLibor manipulation, reversed course and said it would no longerpay their attorneys' fees, the lawsuit said.
The traders contend the bank's action amounted toretaliation for participating in regulatory investigations. Theyalso accused the bank of breach of contract and violations ofConnecticut state law for failing to indemnify them.
A spokeswoman for Barclays did not respond to a request forcomment.
The case is Pabon v. Barclays Bank Plc, U.S. District Court,Southern District of New York, No. 14-7897. (Reporting by Nate Raymond in New York; Editing by CynthiaOsterman)
