After over a year of investigation, the U.S. Department of Justice plans to bring charges against a bank for currency rigging by the end of the year. The DOJ will file additional actions against individuals in 2015.
The probable charges center around allegations that traders at approximately a dozen global banks – including Deutsche Bank, JPMorgan Chase, Barclays, and USB – fixed the foreign exchange market, or “forex,” market. The forex market dwarfs the U.S. stock market, with $5.3 trillion traded daily between approximately 180 currencies. Trading occurs around the world, 24 hours a day. It stops for only one 60-second window at 4 p.m. in London, during which the exchange rates for the coming day are set. This process, in theory, creates a simple, fair, and transparent rate for use by corporate customers around the world (or for that matter, anyone using foreign currency at all).
Investigators, however, have been looking into allegations that traders at a number of large banks colluded to fix the exchange rate to their own advantage. The traders allegedly shared data between one another using instant-message groups with questionable names like “The Cartel,” “The Mafia,” and “The Bandits’ Club,” and used this shared information to push the exchange rate one way or another in their favor immediately prior to the close of the 60-second window.
Both the Justice Department’s antitrust division and criminal fraud division have been investigating these allegations. Although the antitrust division has granted immunity to Switzerland’s largest bank, UBS AG, in exchange for evidence of misconduct, UBS still faces action by the criminal fraud division. Several other banks, including at least one US bank, are expected to plead guilty. Banks have already fired or suspended about 30 employees linked to the currency investigation.
Because the investigations have been confidential, it is not yet known which bank or individuals will ultimately be charged. Recent interviews with DOJ attorneys regarding the private negotiations, given to the New York Times on the condition of anonymity, have provided a limited window into the direction of the investigation and the intent of the Justice Department. The ultimate charges filed could very well influence Attorney General Eric Holder’s legacy as he enters his final weeks at the Justice Department amidst continued public complaints that the DOJ has failed to sufficiently address Wall Street’s misdeeds.