A former currency trader from Purchase who has been implicated in a massive market manipulation scandal is suing XL Insurance Co. for refusing to defend him.The Federal Reserve wants to permanently bar Peter Little from the banking business and fine him $487,500 for allegedly engaging in collusive trading when he was head of a currency trading desk for Barclays Bank PLC.
Little said he is innocent, but XL Insurance of London has refused to pay for his defense, claiming he is not covered under a corporate liability policy.
So far, Little said in the complaint, he has run up $1.1 million in expenses to defend himself and he estimates his costs will total more than $5 million.
Little sued XL Insurance on Dec. 18 in federal court in White Plains to compel the company to pay unspecified damages and to cover his costs up to the limits of Barclays’ insurance policy.
An XL Insurance spokeswoman based in Chicago did not respond to a voicemail message requesting comment.
Barclays hired Little in 2010 to head the spot trading desk in New York City, to primarily trade Euros and U.S. dollars. He was fired in February 2013.
The Fed’s Board of Governors accused him earlier this year of engaging in unsafe and unsound practices and breaches of fiduciary duties. He allegedly rigged currency benchmarks with competitors, failed to supervise other traders who also were manipulating currency rates and disclosed confidential client information to competitors.
For instance, the Fed alleges, he and his traders participated in electronic chat rooms with competitors where they rigged currency rates.
One of the chat rooms was referred to as schadenfreude – joy derived from the misfortune of others. Another was called “the cartel.”
Little benefited, the agency said, because his bonus compensation and position as head of the trading desk were affected by Barclays’ profits.
In 2015, Barclays consented to a Fed order charging it with unsafe and unsound practices, based in part on the conduct by Little’s trading desk. It also faced regulatory actions by the New York Department of Financial Services, U.S. Commodity Futures Trading Commission and United Kingdom Financial Conduct Authority.
Barclays has paid $2.4 billion in criminal and civil fines and has settled a class action lawsuit for $384 million, according to the Fed.
Little asserts that his innocence was reinforced in October when a federal jury in Manhattan acquitted three traders, including one who worked for him, on criminal charges of fixing prices on the foreign exchange market.
Barclays paid Little’s legal expenses before the Fed formally charged him this year. But after the regulatory action was filed, the complaint states, the bank directed Little’s attorney to contact XL Insurance for coverage.
An XL attorney replied in a June 20 letter that Little did not qualify, under the policy, as an insured individual.
Little has demanded a copy of the insurance policy, the complaint states, but Barclays and XL have refused to give him one. The bank did share excerpts of the policy in June, containing two of seven sections about who is insured, with Little’s attorney.
The excerpts, according to the complaint, demonstrate that Little does qualify as an insured employee.
Then on Dec. 5, XL allowed Little’s attorney to review the policy at the offices of Barclays’ attorney. When he arrived, Little’s attorney was told that he was not permitted to reproduce the document or take notes.
“Having reviewed the policy under the conditions that it was made available,” the complaint states, “it is clear that Mr. Little is an insured under the policy and that there are no other policy terms and conditions that would bar coverage for Mr. Little.”
Little is represented by Kenneth H. Frenchman and Alexander M. Sugzda of McKool Smith PC of Manhattan.