The three British currency traders who were part of an exclusive online chat group referred to by members as “the cartel” go on trial this week for alleged market manipulation that’s already cost global banks $14 billion in penalties.
The trio represented banks handling a major chunk of the $5.1 trillion-a-day currency market. The men are accused of rigging a key market benchmark to profit at the expense of competitors and their own customers. Since their behaviour was exposed by Bloomberg in 2013, the industry has pledged to clean up its act with tighter in-house restrictions and better compliance tools.
A highlight of the trial, which began on Tuesday in federal court in New York, will be testimony by a former member of the group, which was also referred to as “the mafia.” Recordings of telephone calls and transcripts of the group’s instant-message chats will probably be presented. Prosecutors say the defendants, who each face as long as 10 years in prison, coordinated their trades to manipulate the spot exchange rate for euros and dollars from 2007 to 2013. All three have pleaded not guilty.
While the US won guilty pleas from four banks — JPMorgan Chase & Co., Citigroup Inc., Royal Bank of Scotland Group Plc and Barclays Plc — none of the individuals at the heart of the conduct have been held accountable. In London, the center of the global currency market, UK officials in 2016 dropped their criminal investigation of individuals, saying there wasn’t enough evidence.
Richard Usher, who went by the moniker “Feston” in chat-room conversations, is the former head of foreign-exchange spot trading in emerging markets in Europe and Asia at JPMorgan. Before JPMorgan, Usher worked at Royal Bank of Scotland. Rohan Ramchandani, known as “Rug” or “Ruggy,” is the former head of spot trading for 10 major currencies at Citigroup. Christopher Ashton, nicknamed “Robocop,” is the former head of spot FX trading at Barclays.
Matt Gardiner, a former UBS Group AG trader who went by “Fossil” in the chat room because he is a few years older than the others, has been cooperating with prosecutors and is expected to testify against the three men at trial. Gardiner wasn’t charged but was prohibited by the Federal Reserve from participating in the banking industry. UBS received immunity from antitrust charges for being the first institution to report misconduct in the market, although it pleaded guilty to a related fraud matter.
The case has already affected the business of currency trading, the world’s biggest market. Guilty pleas by four banks in 2015 resulted in the companies paying $2.5 billion in US fines, plus an additional $203 million penalty for UBS. All told, more than a dozen financial institutions paid about $11.8 billion in fines and penalties globally, with another $2.3 billion spent to compensate customers and investors.