Revelations that the benchmark interest rate Libor was manipulated for years has rocked the financial world. Several large banks may be forced to pay hundreds of millions in penalties and damages. Barclays, based in London, was the first financial institution to be targeted by investigators.

Behind the Scenes in the Libor Interest Rate Scandal

Eduard Pomeranz and Rolf Majcen are small fish in the shark tank of international high finance. Their hedge fund, FTC Capital, is headquartered in tranquil Vienna and manages only €150 million ($189 million) in assets. But now Pomeranz, the founder, and Majcen, the head of the legal department, have been able to strike fear in the hearts of the big fish.

“The Libor manipulation is presumably the biggest financial scandal ever,” says Majcen, a man with slightly disheveled-looking hair and Viennese sarcasm. Yes, he says, it did shock him that something like this was even possible, namely that a group of international banks had been manipulating interest rates for years. But Majcen takes a matter-of-fact approach to it all. As a financial professional, he is only one of many who want to get back the money that they feel they’ve been cheated out of.

At the end of June, British and American regulators imposed a $500 million fine on Barclays, the major British bank, and forced its CEO Bob Diamond to resign. Since then, a war of sorts has erupted in the financial sector. Investigators are attacking presumed offenders, banks that are involved are denouncing others in the hope of mitigating their own penalties, and small investors like Majcen are inundating Libor banks with lawsuits.

Deutsche Bank and more than a dozen other financial giants have come under sharp criticism due to the alleged manipulation of the Libor ( London Interbank Offered Rate), a benchmark interest rate. Some are even referring to the banks that are instrumental in calculating that rate a cartel, the sort of vocabulary not normally associated with the financial industry.

Regulators are using terms like “organized fraud.” European Justice Commissioner Viviane Reding has suggested that bankers ought to be called “banksters.” But in the case of some agencies, especially in New York and London, the outcry is also convenient; it diverts attention away from their own failures. For years, regulators overlooked what was happening right in front of their eyes.

Now that the authorities have woken up, they are aggressively pursuing the offenders — and are reaching all the way up to the boardrooms. More than half a dozen government agencies, from Canada to Japan, are investigating the case.