Derivatives regulators told the U.S. Justice Department they’ve found evidence of criminal behavior following an investigation into banks’ alleged manipulation of ISDAfix, a benchmark used to set rates for trillions of dollars of financial products.

The U.S. Commodity Futures Trading Commission, which first sent subpoenas to the world’s largest banks in November 2012 to determine whether ISDAfix was rigged, has flagged its findings to prosecutors, according to a person familiar with the matter. The CFTC’s enforcement powers are confined to bringing civil, not criminal, cases. It isn’t clear who the CFTC suspects broke the law.

Benchmarks like ISDAfix, which is used to track prices on interest-rate swaps, serve as the foundation of global finance, helping lenders decide how much to charge borrowers and pensions plan their future obligations. Regulators around the world are probing allegations that measures used to set prices in gold, oil, interest rates and currencies were rigged by banks and brokers wanting to pad their profits while cheating their clients and other investors.

Last week, the Alaska Electrical Pension Fund accused 13 banks including Barclays Plc, Bank of America Corp. and Citigroup Inc. as well as broker ICAP Plc of conspiring to manipulate ISDAfix. The U.K. Financial Conduct Authority is also looking into allegations of wrongdoing involving the benchmark.

Representatives of the Justice Department, CFTC, Barclays, Bank of America, Citigroup and ICAP declined to comment.

‘Treasure Island’

Bloomberg News, citing a person with knowledge of the matter, was the first to report last year that the CFTC found evidence traders at Wall Street banks instructed ICAP brokers to buy or sell as many interest-rate swaps as necessary to rig ISDAfix by moving it to a predetermined level. Doing so helped banks reap millions of dollars in trading profits, costing companies and pension funds, the person said at the time.

Brokers on the ICAP desk, nicknamed “Treasure Island” because of the large salaries and bonuses they were paid, negotiate swaps trades on behalf of banks. Until this year, the dollar-denominated version of the ISDAfix rate was set daily by ICAP based on data submissions from banks. Amid the CFTC investigation, ICAP lost that central role. The International Swaps & Derivatives Association Inc., or ISDA, picked Thomson Reuters Corp. to take over that job this year.

Deferred prosecution settlements between regulators and banks including UBS AG and Barclays related to London interbank offered rate rigging have compelled firms to hand over information in the ISDAfix and currency probes to avoid criminal prosecution in the Libor case.

Criminal Prosecution

The CFTC can only bring civil charges. When it suspects criminal prosecution is warranted, it sends the case to the Justice Department, which doesn’t have to accept the referral.

By rigging the measure, the banks stood to profit on separate derivatives trades known as swaptions they had with clients who were seeking to hedge against moves in interest rates. Banks sought to change the value of the interest-rate swaps because the ISDAfix rate sets prices for swaptions, which are used by firms such as the Alaska Electrical Pension Fund, a person familiar with the matter said last year.

That may run afoul of the Dodd-Frank Act, a U.S. law passed in 2010 that bars traders from intentionally interfering with the “orderly execution” of transactions that determine settlement prices.

Skyscrapers, Annuities

ISDAfix rates were created in 1998 by ISDA and the predecessors of Thomson Reuters and ICAP to allow for swap trades to be settled before the termination of their contract. It’s also used to price trades in the $49 trillion swaptions market, as well as borrowing costs on bonds that finance skyscrapers to interest on annuities and structured notes.

In the first lawsuit brought in the case, the Alaskan pension fund claimed the banks colluded to set ISDAfix at artificial levels that allowed them to manipulate payments to investors in the derivatives. The banks’ actions affected trillions of dollars of financial instruments tied to the benchmark, the pension fund said.

The banks communicated using electronic chat rooms and other means of private communication, typically submitting identical rate quotes beginning at least in 2009, the Alaska fund said.

‘Astronomical’ Odds

“This could not have happened without some form of advanced coordination,” the Alaska fund said in its complaint, filed in a federal court in Manhattan. “Even if reporting banks always responded similarly to market conditions, the odds against contributors unilaterally submitting the exact same quotes down to the thousandth of a basis point are astronomical. Yet, this happened almost every single day between at least 2009 and December 2012.”

The near-identical bank submissions to ISDAfix ended in late 2012, the fund said. The original CFTC subpoenas to ICAP and the banks were issued in November of that year, a person familiar with the matter said last year.

The pension fund is seeking to represent all investors that took part in interest rate derivative transactions tied to ISDAfix from January 2006 to January 2014. It’s seeking unspecified damages, which may be tripled under U.S. antitrust law. The fund also named as defendants Deutsche Bank AG, BNP Paribas SA, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Credit Suisse Group AG, UBS, Goldman Sachs Group Inc., Nomura Holdings Inc., Wells Fargo & Co. and JPMorgan Chase & Co. and ICAP.