Currency ‘Cartel’ Traders on Trial for Chats That Cost Billions

(Bloomberg) -- 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 behavior 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 begins 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 U.S. 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, U.K. officials in 2016 dropped their criminal investigation of individuals, saying there wasn’t enough evidence.

Currency ‘Cartel’ Traders on Trial for Chats That Cost Billions


  • 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.

The Star Witness

  • 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.

What’s at Stake

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 U.S. 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. The trial poses a test of the Justice Department’s commitment to punishing individual wrongdoers in corporate cases rather than just accepting cash settlements. After the banks settled, it took almost two more years to indict Usher, Ramchandani and Ashton.

The Evidence

Prosecutors are expected to show the jury transcripts of their chats as evidence that they shared information about client orders and coordinated euro-dollar trades to increase their profits.

Transcripts released by U.S. regulators in 2014 showed the traders used coded lingo and humor to boast about “whacking” and “double teaming” the market and congratulating one another when their plans paid off. According to grand jury testimony, they used code names for their customers: "Big Boy" for China’s central bank, and "Nemesis" for South Korea’s central bank.

At the time, JPMorgan, UBS, Citigroup and Barclays accounted for about 45 percent of the global spot-currency market, according to a survey by Euromoney Institutional Investor Plc.

The tapes and chat transcripts could be compelling evidence for a jury, said Lisa Phelan, a former Justice Department prosecutor now at Morrison & Foerster LLP in Washington. Still, defense lawyers probably will argue the comments aren’t serious or are being taken out of context by prosecutors, Phelan said. Trading in the market can sound complicated, and participants litter their communications with jargon some jurors may not understand.

“The government will be looking to try to tell as simplified a story as it can,” Phelan said. “You risk losing the jury if you’re listening to hundreds of hours of communications, much of which you can assume would be fairly noncontroversial.”

Defense attorneys may also attack the government’s case as an overreach. They unsuccessfully tried to have the case thrown out by arguing that the conduct took place in Europe “with no intended or foreseeable effects” on U.S. commerce.


In recent years, the Justice Department and other regulators, including the Fed, have been investigating allegations of manipulation in several markets, from interest rates and commodities to the benchmark London interbank offered rate, or Libor.

In the currency market, former HSBC Holdings Plc trader Mark Johnson was convicted last year of front-running a $3.5 billion client order. He is appealing. Jason Katz, a former trader at Barclays, and ex-Citigroup trader Christopher Cummins each pleaded guilty last year to conspiring to manipulate emerging-market currency trades.

Industry Promises

The crackdowns led to pledges by bankers and industry executives that they’d clean up bad behavior, and many are paying closer attention to what employees say and do. From 2014 to 2017, broker-dealer operations at banks spent an estimated $2.3 billion to improve compliance with rules, including stronger surveillance tools, according to Boston-based consultant Aite Group. More than 300 market participants have pledged to be good citizens under the voluntary FX Global Code, which aims to boost standards and rebuild trust.

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

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