German financial watchdog BaFin has handed over its investigation into suspected market manipulation by Citigroup traders to German criminal investigators.
BaFin said the investigation - which centres on trades in August where Citigroup traders are alleged to manipulated the price of futures contracts on German-based exchange Eurex - would now be looked into by Frankfurt prosecutors.
Frankfurt prosecutors, who said they had not yet received the case, will decide whether to take the case to court. BaFin said that if they were found guilty, the traders could ultimately face to a five-year jail term or a fine.
But Citigroup cannot be pursued by the prosecutors under German criminal law.
At the heart of the investigation are deals in which traders allegedly aimed to steer prices on the futures market by selling €11 million of cash bonds in less than two minutes and buying back €4 billion of the paper at lower prices soon after.
"The manipulation happened on the Eurex where the traders tried to increase prices and thereafter sell bonds at these higher prices," said the BaFin spokeswoman.
Citigroup said it was disappointed by the referral to prosecutors of the trades, which were carried out on the MTS electronic government bond broking system.