[ by Melanie Gretchen ] U.S. prosecutors and Euro regulators issued a warning that arrests may be imminent involving fixed income traders at banks who may have colluded with their counterparts at other banks to manipulate the Libor interest rate.  According to people familiar with the investigation into the rigging scandal, federal prosecutors in Washington, D.C. have warned lawyers representing some of the suspects that criminal charges and arrests could come in the next few weeks, according to 2 of those sources, who asked not to be identified because the investigation is ongoing. That statement can be interpreted to indicate either of two scenarios:

• investigators have successfully drilled down into the processes and daily computations of Libor, unearthing instances of collusion among traders who have collaborated with their counterparts at other banks; or,

• investigators have not been very productive in these efforts and now hope to "smoke out" guilty traders who believe they will eventually be caught, and that their best chance for a more lenient sentence is to come forward and confess to their crimes".

Widespread Practice. Defense lawyers, some of whom represent suspects, have received word that prosecutors plan to begin making arrests and filing criminal charges in the next few weeks.  In long-running financial investigations, prosecutors often contact defense lawyers before filing charges in order to get them to cooperate or take a plea, these lawyers said  [CI Note: As opposed to giving them a chance to run?]. As the prospects of charges and arrests grow, investigators are learning how traders at major banks allegedly sought to influence Libor, as well as other global rates.  Banks hope findings will support the thesis that  the alleged activity was not widespread throughout the lending industry.

"The individual criminal charges have no impact on the regulatory moves against the banks.  But banks are hoping that at least regulators will see that the scandal was mainly due to individual misbehavior of a gang of traders." -- A European source familiar with the matter, who did not want to be identified because the investigation is ongoing.

Who's Under Investigation. To date, according to Reuters, more than a dozen current and former employees are being investigated, including Barclays, UBS and Citigroup;  to this end, they have hired defense lawyers over the past year as a federal grand jury in Washington, D.C., continues its discovery.  The investigation of 3 years has recently sped up since Barclays agreed to pay 453 million. Other traders being investigated include 4 traders who had worked at Barclays, Credit Agricole, HSBC and Deutsche Bank, The Financial Times said.  Although Credit Agricole has responded to requests for information from various authorities related to the matter, it has not been subject to accusations of any wrongdoing related to the attempted manipulation of Libor by Barclays. For further details, go to [Reuters, 7/23/12].