Market Manipulation Probe Escalates; UK Opens Criminal Investigation Into FX Rigging

Tyler Durden's picture

Since we first exposed to the world that yet another market (foreign exchange) was manipulated by nefarious traders over a year ago, the grand total of prosecutions for market rigging is... zero. As Bloomberg notes, however, more than 25 FX traders have been fired, suspended, or put on leave in that same period. While regulators appear incapable of discovering the truth, the market manipulation probes just got serious..."The [UK] Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market."

 

As Bloomberg reports,

U.K. prosecutors opened a criminal investigation into alleged manipulation of foreign-exchange benchmarks.

 

“The Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market,” the London-based agency said in an e-mailed statement today.

 

Authorities around the world have been investigating whether traders rigged the $5.3 trillion-a-day currency market after the Financial Conduct Authority, the British markets regulator, began a review last year. Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies.

 

More than 25 traders have been fired, suspended or put on leave after the manipulation allegations emerged last year.

 

While the FCA has taken the lead in probing the allegations in the U.K., the U.S. Department of Justice has been investigating possible criminal angles to the matter since last year. Prosecutors there could bring charges and levy fines in the case as soon as this year, a person with knowledge of the affair said last month.

As The Telegraph adds,

Investigators are expected to examine whether individual traders personally benefited by manipulating benchmark forex prices. It is claimed that traders colluded via online chatrooms in groups with names such as the Bandits’ Club, the Dream Team and the Cartel.

 

The SFO’s criminal inquiry into alleged currency markets rigging in London, home to more than 40pc of the world’s foreign exchange trading, will join global investigations into forex market abuse by watchdogs across Europe, Asia, and the US.

 

...

 

Asked whether the FX investigation could be a bigger problem for the industry than Libor, Mr McEwan told London’s LBC radio station: "Unfortunately, it has the hallmarks.”

 

"Unfortunately, I have the feeling that this is a sort of Libor case again. The difference this time is that we haven't sat back and denied it. We've gone into it and are doing the investigation hand-in-hand with the authorities."

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Of course, we strongly suspect no wrongs will be found and no one will be prosecuted (unless some junior trader can be scapegoated for masterminding the entire FX rigging collusion scandal)