Are investment banks using the LIBOR investigation to accuse people of gross misconduct, before making them redundant and clawing back all their stock?

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Fear is stalking the rates desks of banks around the world. Fear and paranoia: no one knows who will be fingered next in the all-pervasive global investigation into LIBOR manipulation.

No one really wants to talk about this fear, particularly on the record. “People are very unwilling to discuss this,” says an ex-trader turned rates headhunter. “It’s still unknown how wide and deep the investigation is going to be. There are an awful lot of people who are worried and no one wants to be implicated and made guilty by association.”

Public heads have already rolled. The Financial Times reported yesterday UBS has suspended both Yvan Ducrot, co-head of its rates business, and Holger Seger, global head of short term interest rate trading. RBS, Citigroup, Deutsche and JPMorgan are also understood to be investigating people, who have either been suspended or have left of their own accord.

The LIBOR investigation is global and it’s unclear how many people have been affected so far, but one headhunter says it’s a lot – as many as 20 or 30. He also says that some of those who’ve been let go are thinking of bringing claims for unfair dismissal against the banks who’ve let them go.

“People are being dismissed for gross misconduct and are being let go without redundancy payments or their stock. Banks are just using this as an opportunity to get rid of people,” he alleges. “It doesn’t help that the FSA is dragging its feet with the investigation and people can’t clear their names.”

The FSA declined to comment.