Five major banks – Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG – will plead guilty to felony charges.
Citicorp, JPMorgan Chase & Co., Barclays PLC, and The Royal Bank of Scotland plc will plead guilty to conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange (FX) spot market and the banks have agreed to pay criminal fines totaling more than $2.5 billion.
UBS AG will plead guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.
JP Morgan was represented by John Carroll of Skadden Arps in New York, New York.
UBS was represented by David Burns of Gibson Dunn in Washington, D.C.
Royal Bank of Scotland was represented by Greg Andres of Davis Polk in New York, New York.
Barclays was represented by David Braff, Karen Seymour, Yvonne Quinn and Alexander Willscher of Sullivan and Cromwell in New York, New York.
Citicorp was represented by Lev Dassin, Mark Leddy, Mark Nelson, Jonathan Kolodner of Cleary Gottlieb in New York, New York.
Between December 2007 and January 2013, euro-dollar traders at Citicorp, JPMorgan, Barclays and RBS – self-described members of “The Cartel” – used an exclusive electronic chat room and coded language to manipulate benchmark exchange rates.
Those rates are set through, among other ways, two major daily “fixes,” the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix.
Third parties collect trading data at these times to calculate and publish a daily “fix rate,” which in turn is used to price orders for many large customers.
“The Cartel” traders coordinated their trading of U.S. dollars and euros to manipulate the benchmark rates set at the 1:15 p.m. and 4:00 p.m. fixes in an effort to increase their profits.
As detailed in the plea agreements, these traders also used their exclusive electronic chats to manipulate the euro-dollar exchange rate in other ways.
Members of “The Cartel” manipulated the euro-dollar exchange rate by agreeing to withhold bids or offers for euros or dollars to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators.
By agreeing not to buy or sell at certain times, the traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX market.
Citicorp, Barclays, JPMorgan and RBS will plead guilty to a one-count felony charge of conspiring to fix prices and rig bids for U.S. dollars and euros exchanged in the FX spot market in the United States and elsewhere.
Citicorp, which was involved from as early as December 2007 until at least January 2013, will pay a fine of $925 million.
Barclays, which was involved from as early as December 2007 until July 2011, and then from December 2011 until August 2012, will pay a fine of $650 million.
JPMorgan, which was involved from at least as early as July 2010 until January 2013, will pay a fine of $550 million.
RBS, which was involved from at least as early as December 2007 until at least April 2010, will pay a fine of $395 million.
Barclays has further agreed that its FX trading and sales practices and its FX collusive conduct constitute federal crimes that violated a principal term of its June 2012 non-prosecution agreement resolving the department’s investigation of the manipulation of LIBOR and other benchmark interests rates.
Barclays has agreed to pay an additional $60 million criminal penalty based on its violation of the non-prosecution agreement.
The Justice Department has determined that UBS’s deceptive currency trading and sales practices in conducting certain FX market transactions, as well as its collusive conduct in certain FX markets, violated its December 2012 non-prosecution agreement resolving the LIBOR investigation.
The department has declared UBS in breach of the agreement, and UBS has agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate LIBOR and other benchmark interest rates.
UBS has also agreed to pay a criminal penalty of $203 million.
UBS engaged in deceptive FX trading and sales practices after it signed the LIBOR non-prosecution agreement, including undisclosed markups added to certain FX transactions of customers.
UBS traders and sales staff misrepresented to customers on certain transactions that markups were not being added, when in fact they were.
On other occasions, UBS traders and sales staff used hand signals to conceal those markups from customers.
On still other occasions, certain UBS traders also tracked and executed limit orders at a level different from the customer’s specified level in order to add undisclosed markups. In addition, according to court documents, a UBS FX trader conspired with other banks acting as dealers in the FX spot market by agreeing to restrain competition in the purchase and sale of dollars and euros.
UBS participated in this collusive conduct from October 2011 to at least January 2013.
In declaring UBS in breach of its non-prosecution agreement, the Justice Department considered UBS’s conduct described above in light of UBS’s obligation under the non-prosecution agreement to commit no further crimes.
The department also considered UBS’s three recent prior criminal resolutions and multiple civil and regulatory resolutions.
Further, the department also considered that UBS’s post-LIBOR compliance and remediation efforts failed to detect the illegal conduct until an article was published pointing to potential misconduct in the FX markets.
Citicorp, Barclays, JPMorgan, RBS and UBS have each agreed to a three-year period of corporate probation, which, if approved by the court, will be overseen by the court and require regular reporting to authorities as well as cessation of all criminal activity.
All five banks will continue cooperating with the government’s ongoing criminal investigations, and no plea agreement prevents the department from prosecuting culpable individuals for related misconduct.
Citicorp, Barclays, JPMorgan and RBS have agreed to send disclosure notices to all of their customers and counter-parties that may have been affected by the sales and trading practices described in the plea agreements.
The Federal Reserve also announced that it was imposing on the five banks fines of over $1.6 billion; and Barclays settled related claims with the New York State Department of Financial Services (DFS), the Commodity Futures Trading Commission (CFTC) and the United Kingdom’s Financial Conduct Authority (FCA) for an additional combined penalty of approximately $1.3 billion.
In conjunction with previously announced settlements with regulatory agencies in the United States and abroad, including the Office of the Comptroller of the Currency (OCC) and the Swiss Financial Market Supervisory Authority (FINMA), today’s resolutions bring the total fines and penalties paid by these five banks for their conduct in the FX spot market to nearly $9 billion.