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* First U.S.-based Libor traders charged by SFO
* Prosecutor says the 3 conspired with colleagues in London
* Next court appearance scheduled for Thursday (Adds details of charges, possible sentence)
By Kirstin Ridley
LONDON, May 27 (Reuters) - Three ex-traders from bankinggroup Barclays appeared in a London court on Tuesday asBritain began criminal proceedings against U.S.-based Libortraders, part of a global investigation into alleged rigging ofbenchmark interest rates.
The Serious Fraud Office (SFO) alleges that Jay Merchant,43, a director of dollar fixed-income swaps, and interest-ratederivative traders Alex Pabon and Ryan Reich, aged 35 and 32respectively, conspired together and with others to defraudbetween June 2005 and September 2007.
The men, who spoke only to confirm their names and dates ofbirth, allegedly conspired with three London-based formerBarclays employees, who have already been charged by the SFO, aswell as other Barclays employees to manipulate rates to improvetheir own or their colleagues' trading positions.
British and U.S. prosecutors have charged 16 individuals todate in connection with the investigation into alleged riggingof benchmarks such as Libor (or London interbank offered rate),against which around $450 trillion of financial contracts fromderivatives to credit card loans are priced worldwide.
U.S. and European regulators have meanwhile fined 10 banksand brokerages - including JPMorgan, UBS,Deutsche Bank, Royal Bank of Scotland andICAP - more than $6 billion to settle allegations.
Merchant, Pabon and Reich each face one count of conspiracyto defraud, an offence which usually carries a maximum jailsentence of 10 years in Britain. They were ordered to appearbefore a higher Crown Court on Thursday.
Lawyers for Reich and Merchant have said their clients denyallegations of wrongdoing. Pabon's lawyer declined comment.
Merchant, Pabon and Reich voluntarily attended London'sWestminster Magistrates' Court without the need for the SFO tostart extradition proceedings and have been allowed to remainresident in the United States under their bail conditions.
But they each have to pay a 50,000 pound ($84,200) securityto the court, which they will forfeit if they fail to appear forhearings. The next hearing has been scheduled at London'sSouthwark Crown Court.
CO-CONSPIRATORS
The SFO in February charged three former London-basedBarclays Libor submitters - Peter Johnson, Jonathan Mathew andStylianos Contogoulas - who were named as co-conspirators inTuesday's charges against Pabon, Merchant and Reich.
The submitters were supposed to accurately tell an industrytrade body the rates banks would charge each other for loans.But traders are alleged to have colluded on answers that couldnudge the reported rates by amounts that were tiny but couldtranslate into big profits.
The investigation into benchmark interest rates has beenpartly overshadowed by a parallel global inquiry intoallegations of foreign-exchange market rigging, which has led toabout 35 people being suspended, placed on leave or fired.
But the inquiry into Libor and related Euribor rates hasbeen gathering steam. British and U.S. watchdogs fined brokerageRP Martin $2.3 million two weeks ago to settle claims its staffhelped manipulate Libor, and in March the SFO charged threeformer ICAP brokers.
Barclays was the first bank to settle U.S. and UK regulatoryallegations of rate manipulation, paying around $450 million infines in 2012. Regulators admitted privately they were takenaback by an ensuing public and political backlash, which forcedout four top Barclays directors including Chief Executive BobDiamond, sparked a fraud squad probe and parliamentary reviews.
The British bank was fined another 26 million pounds lastweek for failing to prevent a trader from allegedly manipulatinggold prices.
Thomson Reuters calculates and distributes Libor onbehalf of a subsidiary of U.S.-based ICE (IntercontinentalExchange). ICE became the administrator for Libor onFeb. 1 after the British Bankers' Association was stripped ofthe role. ($1 = 0.5936 British Pounds) (Editing by David Holmes)
