Five major U.S. and European banks Wednesday agreed to plead guilty to criminal charges and pay more than $ 5 billion in collective penalties in sweeping settlements of charges their traders manipulated the $ 5.3-trillion-a-day foreign exchange currency market for their own profit.
The Department of Justice and other U.S. and European authorities and regulators said the parent companies of Citicorp (C), JPMorgan Chase (JPM), London-based Barclays (BCS) and Royal Bank of Scotland (RBS) acknowledged their traders manipulated foreign exchange prices of U.S. dollars and euros for several years starting in December 2007.
UBS (UBS) received conditional immunity from U.S. criminal prosecution for its role in the foreign-exchange rate-rigging because the Swiss banking giant was the first to report foreign-exchange misconduct to DOJ investigators. The bank and subsequently provided “full cooperation” to federal prosecutors and other authorities in Europe and around the world.
But that leniency carried a high price. Making good on threats to deal harshly with banks accused as repeat offenders, federal investigators tore up the 2012 non-prosecution agreement that had settled UBS’ involvement in rigging the London Interbank Offered Rate (Libor), a financial benchmark used to set rates on trillions of dollars in mortgages, loans and credit cards.
As a result, UBS agreed to plead guilty to one count of wire fraud, pay a $ 203 million fine and accept a three-year term of probation for Libor rate manipulation by its traders. UBS also agreed to pay $ 342 million to the Federal Reserve and make remedial changes to its foreign-exchange business practices.
The foreign-exchange criminal resolutions mark the latest result from a global crackdown on systematic manipulation of financial benchmarks by bank traders. In all, the five banks have now paid nearly $ 9 billion in total fines and penalties for rigging the foreign-exchange spot market, the Department of Justice said.
Attorney General Loretta Lynch outlined the “brazen display of collusion and foreign exchange rate market manipulation,” as she announced the settlements in a Wednesday morning news conference.
“Starting as early as Dec 2007, currency traders at several multinational banks formed a group dubbed ‘The Cartel,’ ” Lynch said. “It is perhaps fitting that those traders chose that name, as it aptly describes the brazenly illegal behavior they were engaging in on a near-daily basis.”
Federal prosecutors said euro-U.S dollar traders at Citicorp, JPMorgan, Barclays and RBS — self-described members of the cartel — used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates of the two currencies in ways that benefited their own trading positions.
One chat room exchange showed that a Barclays foreign exchange trader was desperate to join The Cartel and reap the benefit of its trading advantages in 2011.
After extensive discussion of whether or not this trader “would add value” to the group, he was invited to join for a “1 month trial,” but was advised “mess this up and sleep with one eye open at night.”
Swiss banking giant UBS agreed Wednesday to pay $ 545 million to settle a probe by U.S. authorities into its role in manipulating interest and currency rates. In a statement, the bank said it agreed to plead guilty to one count of wire fraud. Wochit
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