‘I Owe It All to You’: Ex-Trader Decodes FX ‘Cartel’ Tactics

(Bloomberg) -- Even after a group of British currency traders known as "The Cartel" began to sense their online chats were being watched, they didn’t stop illegally conspiring to rig the markets by using code words, one of them told a Manhattan federal jury.

Matt Gardiner, a former currency trader at Barclays Plc and UBS Group AG, deciphered for jurors chatroom transcripts and recorded phone calls, including messages from 2012 and 2013 when the London banking world was consumed in a scandal over interest-rate benchmarks.

"for compliance purpose
no collusion going on here

That’s what former JPMorgan Chase & Co. trader Richard Usher wrote in a July 2012 chat with Gardiner, former Citigroup Inc. trader Rohan Ramchandani and Christopher Ashton, previously head of spot FX trading at Barclays.

As the New York trial of former foreign-exchange traders accused of rigging the $5.1-trillion-a-day currency market started its second week, Gardiner spent most of his time Monday taking jurors through the day-long chats and telephone calls they shared, full of Cockney rhyming slang, references to “Star Wars” and a BBC kids’ show.

Explaining one chat, Gardiner told jurors that one of the other traders had an open position totaling 625 million euros ($724 million), or, in their lingo, a monkey (500 million euros) and half a chimp (125 million euros).

The traders discussed their interests and open positions in the online chats before key price benchmarks were set in London, Gardiner said. In some cases, they would tag-team trades in an effort to move prices in the same direction, or hold off if their bets might trigger a loss for others.

Occasionally, the “stars aligned” and all the bankers’ interests and customer orders would point in the same direction, he said.

Ramchandani in 2008 chat message: “It’s awesome I think we’re both helping each other out”

Usher: “Best day for as long as I can remember” “And I owe it all to you”

Ramchandani: “I’m having best week ever too”

The case will likely hinge on Gardiner’s cross-examination. The government agreed not to prosecute Gardiner in exchange for his testimony. And defense lawyers will try to convince jurors he can’t be believed.

The lawyers for the accused said in their opening arguments that the chat forums weren’t illegal, and instead were an everyday fixture in the traders’ jobs where they’d do deals, swap market color, joke around and build relationships.

Gardiner is a “deeply flawed witness,” who won’t spend a day in prison because of the deal he made with prosecutors, Heather Tewksbury, Ramchandani’s lawyer, told jurors last week.

When Ashton was told by Barclays’ compliance department that he couldn’t participate in multibank chats, he left the chatroom in August 2012.

Usher noted the occasion, saying:

man down"

Defense lawyers, who questioned Gardiner’s credibility during opening arguments, began cross-examining him Tuesday.

Usher’s lawyer, Michael Kendall, spent much of his time walking Gardiner through transactions he’d testified about, trying to show they weren’t intended to cheat the market. He also had Gardiner testify that, when he was originally questioned by U.S. authorities about the chatroom in 2013, he was convinced they had done nothing wrong. It was only later, during the investigation by the Justice Department, that Gardiner came to realize The Cartel had violated U.S. competition law.

"In the process of cooperating with the DOJ, I realized some of the ramifications of my conduct," he testified.

Kendall introduced into evidence letters from the U.K.’s Serious Fraud Office to Usher, Ramchandani and Gardiner announcing the end of its investigation of them in March 2016 without charges.

Gardiner also agreed with Kendall that "The Cartel" was not the name of the chatroom but a moniker given them by somebody outside the group. Gardiner said the group frequently changed the name of the chatroom, including "Clueless," "FX is Tricky" and "Thinking of Quitting."

The trial is expected to run for at least two more weeks in Manhattan federal court.

The case is U.S. v. Usher, 17-cr-00019, U.S. District Court, Southern District of New York (Manhattan).

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