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(Adds background of law firm, ex-SEC chief litigator hired inBarclays dark pool probe)
By Steve Slater and Sarah N. Lynch
LONDON/WASHINGTON June 27 (Reuters) - Barclays Plc has hired lawyers from the high-profile firm Wilmer CutlerPickering Hale and Dorr LLP to help the bank defend itselfagainst accusations that it deceived investors in its "darkpool" trading venue, according to people familiar with thematter.
Matthew Martens, formerly the chief litigator at the U.S.Securities and Exchange Commission, is among the WilmerHalelawyers working on the case, the sources said.
Martens is known for leading the SEC to victory in its civilfraud trial against Fabrice "Fabulous Fab" Tourre, the formerGoldman Sachs vice president who was found liable by aNew York jury for misleading investors in a subprime mortgageproduct that failed during the financial crisis.
Kerrie Cohen, a spokeswoman for the bank, declined tocomment.
Martens did not respond to an e-mail seeking comment.
Barclays' shares slid 6.5 percent on Thursday to a 19-monthlow after New York Attorney General Eric Schneiderman filed asecurities fraud lawsuit that takes aim at the British bank's"dark pool" trading venue, known as LX Liquidity Cross.
Dark pools let institutional investors trade large blocks ofshares anonymously and only make trading data availableafterwards so that investors with large orders are not at adisadvantage.
The news wiped more than 2 billion pounds ($3.4 billion) offof Barclays' market value on Thursday, though the stock closedup 0.5 percent on Friday on the London Stock Exchange. Barclays'New York-listed shares tumbled 7.4 percent on Thursday to closeat a 19-month low of $14.55 following news of the lawsuit andthen recovered on Friday, ending up 2.1 percent.
The attorney general's lawsuit accuses the Barclays darkpool of giving high-frequency traders an unfair advantage, eventhough the bank had promised investors they would be protectedfrom "predatory" and "toxic" traders.
The complaint also said the bank broke its promise to getits customers the best prices by executing nearly all of theirorders on LX, instead of searching for better deals at rivalexchanges and trading platforms.
Barclays' dark pool business originally belonged to LehmanBrothers, the investment bank that collapsed in September 2008.Barclays subsequently bought Lehman's U.S. business.
The 31-page complaint from Schneiderman said internalBarclays documents valued the growth opportunity from pushingmore orders into its dark pool at between $37 million and $50million per year.
Total revenues for the dark pools business may be $100million to $200 million, industry sources and analystsestimated, out of $4.6 billion in equities revenues last year.
Analysts said the hit to its stock reflects broader concernthat customers may leave Barclays and that Chief ExecutiveOfficer Antony Jenkins will struggle to turn around the bank'sculture as quickly as he needs to, as well as anxiety about thethreat of higher-than-expected litigation costs on a range ofissues.
"The complaint reminds investors of the litigation burdenthat faces the sector and Barclays," said Michael Helsby, ananalyst at Bank of America Merrill Lynch.
The CEO told Barclays staff in a memo issued on Thursday hehad started an internal investigation into the allegations.
"To assist us in that, we have brought in substantialexternal resource to ensure that the investigation can proceedat pace and is properly objective," Jenkins' memo said.
The memo did not disclose which law firm had been hired.
Barclays has been hit by a series of scandals in recentyears, including its role in the rigging of the Libor interestrate, which cost then-CEO Bob Diamond his job in 2012, leadingto huge fines and legal bills.
Helsby raised his estimate of possible litigation costs forBarclays to 7.5 billion pounds over the next three years, from2.4 billion, and cut his price target on the stock to 285p from350p.
Barclays, which has 20 days to respond to the lawsuit, saidon Friday it was still assessing the complaint.
Barclays could incur a litigation cost of $163 million fromthe dark pool activities, Credit Suisse analysts estimated.
Rival banks have pulled business out of Barclays' dark pool,the Financial Times reported. Deutsche Bank, CreditSuisse and Royal Bank of Canada and assetmanager Alliance Bernstein had all withdrawn from the dark pool,it said, citing people familiar with the matter.
Barclays has the second most-active alternative tradingsystem in the United States after Credit Suisse, according todata compiled by the Financial Industry Regulatory Authority,the Wall Street-funded regulator.
They are followed in size by UBS , Bank ofAmerica Merrill Lynch, Morgan Stanley, DeutscheBank and Goldman Sachs.
Shares of other banks also fell after the Barclays lawsuit,on concern that others will also be targeted.
($1 = 0.5880 British Pounds) (Reporting by Steve Slater in London and Sarah N. Lynch inWashington; Additional reporting by Lionel Laurent; Editing byDavid Stamp and Jan Paschal)
