‘Cartel’ Chatroom Messages Show Currency Conspiracy, Prosecutor Says

(Bloomberg) -- A former UBS Group AG banker is set to testify as soon as Thursday as the U.S. government’s star witness against three British traders accused of conspiring to rig the foreign-exchange market.

Matt Gardiner is expected to tell a jury in Manhattan federal court that the men used an electronic chatroom dubbed "the Cartel" to manipulate the $5.1 trillion-a-day currency market. His testimony is the cornerstone of the government’s effort to punish individuals involved in rigging key market benchmarks.

Gardiner’s testimony follows Wednesday’s opening arguments in the trial of Richard Usher, former head of foreign-exchange spot trading in emerging markets in Europe and Asia at JPMorgan Chase & Co., Rohan Ramchandani, former head of spot trading for 10 major currencies at Citigroup Inc., and Christopher Ashton, former head of spot FX trading at Barclays Plc.

Justice Department attorney Jeffrey Martino previewed some of the communications that will be presented. Ashton said his chats with fellow traders would look "f-ing awful" when they came to light, Martino said.

“I prefer we join forces,” was one of the messages in a chatroom that was also known as "the Mafia" and cited by the government. “One team, one dream, mate,” was another.

“These are the words of conspirators working to cheat the market,” Martino told the jury of 10 women and two men. "They basically worked together to stack the deck."

‘Cartel’ Chatroom Messages Show Currency Conspiracy, Prosecutor Says

The trial is a test for the Justice Department, which has until now accepted cash settlements from traders’ employers. More than a dozen financial institutions paid about $11.8 billion in fines and penalties globally in the wake of the currency rigging scandal, with another $2.3 billion spent to compensate customers and investors.

Defense attorneys for the three men said the government is cherry-picking language and mischaracterizing it as collusion when in fact the traders were joking around and blowing off steam. It was also their job to communicate with one another throughout the day to share market color and do deals, the lawyers said. Their use of the electronic chat rooms was also widely known, not a secret and a common practice throughout the industry, they said.

"There’s no smoke-filled backroom, no secret meetings," said Heather Tewksbury, Ramchandani’s lawyer. "There’s no secret price-fixing agreement."

Defense lawyers also said that the men made independent trading decisions based on their own self-interest even though at times it looked as though they were acting in concert.

Gardiner, who went by “Fossil” in the chatroom because he’s a few years older than the others, will explain how and why the traders came together to cheat, the strategies they used and why he came forward, the government said. He wasn’t charged but was prohibited by the Federal Reserve from participating in the banking industry.

Lawyers for the accused tried to undermine Gardiner by portraying him as not credible. Gardiner started the chatroom and at one point said matching orders in the chatroom was an acceptable practice, they said. He is a “deeply flawed witness,” who won’t spend a day in prison because of the deal he made with prosecutors, Tewksbury said.

The trial is likely to take at least three weeks. Jurors will see trading records -- “the fingerprints, the DNA of the crime,” Martino said.

If convicted, the men face as long as 10 years in prison. The trading behavior in the FX market was exposed by Bloomberg in 2013.

While the U.S. won guilty pleas from four banks -- JPMorgan Chase, Citigroup, Royal Bank of Scotland Group Plc and Barclays -- none of the individuals at the heart of the conduct have been held criminally 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.

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

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