US Justice Department pursuing FX chat room collusion criminal charges thanks to informant Matt Gardiner from UBS


News outlet Bloomberg is reporting that the ongoing US Justice Department investigation into chat room collusion by FX traders at some of London’s big banks might finally be coming to a conclusion. Bloomberg has reported that one of the London-based FX traders from the chat room ‘Cartel’ has agreed to a reduced sentence in return for a guilty plea and cooperating with US authorities.

A common tactic of law enforcement officials when pursuing several suspects, especially in cases involving suspected collusion among those suspects, is to get one of the suspects to cooperate in return for leniency. Otherwise, collusion is often hard to prove.

UK officials from the Serious Fraud Office (SFO) actually dropped their own parallel investigation last month, believing that they simply don’t have enough evidence, and they were unable to get one of the suspects to turn on the others.

The US investigation, announced more than a year ago, was also seemingly going nowhere until the recent reports that charges against certain individuals may be imminent. The episode may also open up a cross-Atlantic war between US and UK law enforcement officials.

So who is the US government informant?

According to Bloomberg it is Matt Gardiner, a former UBS Group AG (USA) (NYSE:UBS) FX trader known in the chat room world as ‘Fossil’. With Gardine’s cooperation, US officials are apparently confident that they will be able to bring specific charges over currency rate manipulation as soon as this summer.

The financial institutions named by US officials last year include UBS, JPMorgan Chase, Citigroup, Royal Bank of Scotland, and Barclays.

There is also a political angle to the story. The Obama administration and Justice Department leadership have both stressed the importance of holding individuals accountable for corporate crime. With the Obama presidency heading into the ‘lame duck’ portion of its tenure with the US presidential election just over six months away, the political will to pursue charges may soon evaporate.

US official have said that traders in the chat room from different bug banks used coded lingo to share information about client orders, and coordinated euro-dollar trades in an effort to increase their profits.

Gardiner, a currency trader who worked at several banks, apparently gained his chat room nickname of Fossil because he was a few years older than other members. Other participants were reportedly Richard Usher of RBS and JPMorgan, Rohan Ramchandani from Citigroup, and Barclays trader Chris Ashton.

Bloomberg’s sources didn’t say whether any of the traders in the Cartel are likely to be charged. None of them have been charged elsewhere or have made public comment.

Bloomberg admitted that whether or not Gardiner has actually agreed to cooperate in exchange for lenient treatment was unclear. Their sources did state that he has been cooperating with US authorities for at least several months.

UBS received immunity from charges for being the first institution to report suspected misconduct, although it pleaded guilty to a related fraud matter. Prosecutors can extend that immunity to former employees.

The Cartel chat room ran from at least December 2007 until January 2013, according to people familiar with the matter. The conversations paused in 2010 when Usher left RBS and started again when he joined JPMorgan later in year as a currency dealer in London, they said.

Membership was coveted, those people said: The four banks with senior traders in the Cartel’s later iteration – JPMorgan, UBS, Citigroup and Barclays – controlled about 45% global spot FX market.

The banks have provided transcripts of chat room activity to the Justice Department and international authorities. Many conversations took place just before daily currency fixes – the brief windows of time when data providers take a snapshot of trading so they can set daily rates.

One such transcript reported by Bloomberg gives a flavor of the jargon and joke filled exchanges among the traders. The transcript below from a January 2012 exchange identifies the participants as Gardiner, Usher and Ramchandani, who others sometimes called Rug or Ruggy. It took place just ahead of the January 5, 2012 1:15 p.m. European Central Bank fix, which provides a daily benchmark of the Euro exchange rate with more than 30 currencies:

Ramchandani: getting 250 on ecb

Gardiner: gettin 30 here

Gardiner: a 22 fix wld suit if you cld oblige rug

Ramchandani: hahahahah

Usher: I need 65 rug

Usher: or u want a lesson

Ramchandani: 🙂

Ramchandani: haha

Ramchandani: 65 urs ricardo

Usher: ta

Gardiner: popcorn anyone?

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US Justice Department pursuing FX chat room collusion criminal charges thanks to informant Matt Gardiner from UBS

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