Below is a summary of what Citi and UBS (Harry’s “forever” investments) pleaded guilty to from NYT’s Dealbook
HEAVY FINES FOR FOREIGN EXCHANGE COLLUSION At big banks, foreign exchange trading seemed like the ideal business – relatively low risk for solid revenues. But “what seemed like the perfect business turned out to be the perfect breeding ground for crime,” Michael Corkery and Ben Protess write in DealBook. Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland pleaded guilty to a series of federal crimes over a scheme to manipulate the value of the world’s currencies, the Justice Department said Wednesday. A fifth bank, UBS, was also accused of foreign currency manipulation but was not criminally charged because it had alerted the Justice Department to possible misconduct. However, the accusations cost the bank an earlier nonprosecution agreement related to the manipulation of the London Interbank Offered Rate, or Libor.
Prosecutors said traders at the five banks colluded from at least 2007 to 2013. “To carry out the scheme, one trader would typically build a huge position in a currency, then unload it at a crucial moment, hoping to move prices. Traders at the other banks would play along, coordinating their actions in online chat rooms,” Mr. Corkery and Mr. Protess write. The foreign exchange business may have been particularly susceptible to manipulation because it can be less profitable than other forms of trading, which increases the pressure for the traders to look for alternative ways to pad their returns, analysts said. Also, no one government agency is responsible for policing the currency market, creating a regulatory void.
The five banks, which also struck civil settlements with the Federal Reserve, the Commodity Futures Trading Commission, a British regulator and New York’s financial regulator, agreed to pay $5.6 billion in penalties. That is in addition to the $4.25 billion that some of these banks agreed to pay in November to many regulators. Together, the amount nearly equalsthe foreign exchange revenue generated at 10 of the world’s largest banks last year, which was $11.6 billion, according to Coalition, a financial analytics provider.
He notes that guilty pleas from the big banks are “noticeably tougher” than the enforcement actions of the past, when violations drew only deferred or nonprosecution agreements. Yet the act of pleading guilty doesn’t carry the same stigma as it did in the past, Mr. Henning writes, because the government has tried to keep a guilty plea from hindering a bank’s operations. The Justice Department has also been demanding the identities of the employees behind the violations, but it’s unclear whether it will actually prosecute those people. “To change corporate culture and prevent violations from happening in the future, prosecutors may have to go beyond just demanding cooperation and threatening ever larger fines,” Mr. Henning contends.