British Cartel Traders Acquitted of Rigging Currency Market

(Bloomberg) -- Three British traders were acquitted of using an online chatroom to fix prices in the $5.1 trillion-a-day foreign exchange market, a blow to global efforts to police the industry.

A federal jury in New York rejected the U.S. claim that Richard Usher, Rohan Ramchandani and Chris Ashton, a group known as "The Cartel," rigged the market from 2007 to 2013 by coordinating trades and manipulating prices on the spot exchange rate for euros and U.S. dollars.

The three men wept in relief and hugged supporters after the verdict was handed down Friday. Jurors deliberated for about half a day before rejecting the prosecution’s case against them.

British Cartel Traders Acquitted of Rigging Currency Market

“This is a signal to all foreign exchange traders that they can go back to business as usual,” Mayra Rodriguez Valladares, a former foreign-exchange analyst for the New York Fed, said of the acquittal.

Valladares, who also conducts training for bankers and regulators through her consulting firm MRV Associates Inc., predicted the verdict will be bad news for asset managers on the buy side -- such as pension funds and insurance companies -- who stand to lose money on products tied to the FX market because they lack the minute-to-minute information banks have. And it may lead to increased pressure on regulators.

“The FX code is not going to be seen as having any teeth,” she said, referring to the FX Global Code, a set of guidelines aimed at raising standards.

The men faced as long as 10 years in prison had they been convicted.

Prosecutors Criticized

Ashton’s lawyer in the U.K., Sara George, slammed prosecutors for basing their case on a single cooperating witness, saying it could’ve resulted in a miscarriage of justice.

“This case should never have been brought,” George said in a statement. “Dozens of traders lost their jobs and simply billions of pounds were paid by British banks, including taxpayer-owned British banks, for something that did not happen.”

Usher’s lawyer, Jonathan Pickworth, called the verdict "the end of a five-year nightmare" for his client.

Jurors accepted defense lawyers’ arguments that the members of the Cartel behaved just as other market traders in the late 2000s and early 2010s.

"It was a microscope that was placed on something that probably was happening all the time," the jury foreman, Lucien Samaha, 60, an artist in New York City, said after the verdict. "At the end, we found there was not enough evidence."

The Department of Justice said it respects the jury’s decision and will evaluate its next steps. The department said in a statement that it remains committed to holding individuals accountable for their roles in committing complex financial crimes.

While the U.S. has 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 has been found responsible. UBS Group AG received immunity from antitrust charges for being the first institution to report misconduct in the FX market, although it pleaded guilty to a related fraud and paid a $203 million penalty. More than a dozen financial institutions have paid about $11.8 billion in fines and penalties globally, with another $2.3 billion spent to compensate customers and investors.

U.K. investigators dropped a criminal investigation of individual FX traders, finding there wasn’t enough evidence to prosecute.

Usher, a former JPMorgan foreign-exchange trader, Ramchandani, a former trader at Citigroup, and Ashton, the ex-head of spot FX trading at Barclays Plc, were charged in January 2017. The case followed an investigation into conduct that was exposed by Bloomberg in 2013.

The three men, who were based in London, waived extradition to New York to fight the single charge of conspiracy to restrain trade. Ramchandani missed the birth of a child in England last weekend, according to testimony from a former colleague. None of the defendants took the stand.

Matt Gardiner, a former currency trader at Barclays and UBS Group AG who helped organize the group, testified for the government. In exchange the U.S. promised not to prosecute him. Gardiner said the group agreed on trading strategies and would congratulate each other when their bets paid off. He also testified that he had no idea the group was doing anything illegal until he began negotiating with prosecutors. In closing arguments, lawyers for the defendants urged jurors to reject his testimony.

Jurors heard testimony that the men spent almost all of their work days in the chatroom, where they exchanged market color, inside jokes and personal information. Prosecutors showed transcripts of some of the chats, recorded phone calls and trading records to try to show coordination among the group. The defense said the chats reflected innocent banter and that the traders sought to profit off one another.

Javier Paz, founder of Forex Datasource, a research and advisory firm, said in an email before the verdict that the investigation has signaled to traders that “illegal actions carry a high risk of betrayal.” Whether the case will have a longer-term impact remains to be seen.

“These gentlemen dodged a major bullet, and now industry will try to understand whether this was a case of a prosecution that was lacking in substance or poorly executed,” Paz said in an email. “Either way, I doubt any in the OTC FX industry are naive enough to believe this gives anyone carte blanche to misbehave.”

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

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