Back in 2012, when the first massive marketwide-rigging scandal made the front pages, that of Libor (one which Zero Hedge discussed first in January 2009 with "This Makes No Sense: LIBOR By Bank" and for which we won early points in the "you are a fringe tinfoil blog" category until proven correct as usual) the prosecution's case was handed on a silver platter by one bank which hoped it would squeeze through the prosecutorial cracks by ratting out all of its heretofore complicit partners in crime: UBS.
And sure enough, UBS did indeed get away with a paltry fine, and the whole affair was quietly swept under the rug with a December 2012 settlement, in which the U.S. agreed not to prosecute the bank on the condition that it “commit no United States crime whatsoever” for the two-year term of the agreement, subsequently extended by an extra year.
Unfortunately for UBS, its reputation as a ratting squealer was all for nothing, because just over one year later UBS as well as virtually all the same banks that were manipulating Libor, were caught rigging that other massive, global market in secret online chatrooms such as the "Bandits" and the "Cartel": foreign currency rates.
And also unfortunately for UBS which had sworn to commit no US crimes, it had just been caught committing at least one US crime. As a result, as Bloomberg reported earlier this week and as WSJ reported tonight, the US "Justice" Department is now tearing up and voiding the UBS 2012 settlement.
Actually, make that two crimes: "UBS also was viewed by the Justice Department as a repeat offender, having reached previous settlements including one in 2011 related to antitrust violations in the municipal-bond investments market."
Actually, make that three crimes: "[Justice Department criminal division head Leslie] Caldwell's message in the talks was stern: UBS was a recidivist having previously settled with the Justice Department over antitrust violations and had also obtained a deferred-prosecution agreement in 2009 to resolve charges it helped American taxpayers hide money overseas."
Sure enough, UBS is shocked, shocked to find out there was criminal gambling going on in its world's largest trading floor in Stamford, CT which is on its way to becoming a mini golf course. And again. And again.
UBS officials are confounded by the outcome, some of the people familiar with the negotiations said. The bank believes it provided early cooperation which helped prosecutors break open the foreign-exchange investigations and, as a result, was promised immunity by the antitrust division of the Justice Department.
But for prosecutors the punishment is seen as justified, the people said: The bank promised not to break the law in its 2012 deal and it violated those terms when its traders engaged in the currency-market misconduct after the 2012 agreement, they said. Prosecutors have been investigating whether traders colluded to move currency rates to benefit themselves to the detriment of clients.
We too would be shocked to learn that ratting out all our former peers and colleagues doesn't pay off in the end.
The WSJ also adds, "the negotiations with the Justice Department are expected next week to result in UBS paying a fine of about $200 million to the Justice Department and pleading guilty to allegations that UBS traders manipulated the London interbank offered rate, or Libor, prior to 2012, according to some of the people."
While the fine is paltry, the guilty plea will open the bank to a myriad of lawsuits from around the globe, which will surely result in billions of new recurring, non one-time "one-time, non recurring" legal fees, charges and further settlements as UBS is now open to litigation by anyone and everyone.
And while we applaud the DO"J" for doing its job for once, will it be too much just once not to assume everyone is an idiot and that clearly the DO"J" has a bias against foreign banks who are used as a buffer to avoid prosecution of domestic banks, which have mysteriously gotten away with virtually every criminal act known to man and mafia.
Such as JP Morgan for example. The same JP Morgan whose luck may have run out, because according to the WSJ, in addition to UBS, Barclays, Citigroup, RBS, and J.P. Morgan "are expected to plead guilty to criminal antitrust charges and pay between $500 million and more than $1 billion in penalties to various government entities, according to company disclosures and people familiar with the talks. On Thursday, J.P. Morgan disclosed in a financial filing that “any resolution acceptable to DOJ would require that the Firm plead guilty to an antitrust charge.”
Curiously, it is none other than JPMorgan who courtesy of Troy Rohrbaugh happens to be the Chairman of the Fed's Foreign Exchange Committee.
We are confident, however, that JPMorgan admiting guilt to a criminal anti-trust FX rigging charge will have zero impact on, and no conflicts of interest whatsoever with it remaining head advisor to the NY Fed on all issues FX.
And while there are several things we can be absolutely certain of i) the banks will pay a few more billion in settlements here and there, and maybe UBS will be barred from competing with Goldman and JPM in fields in which the US banks feel there is "too much competition" (because a Lehman-type raid on a key competitor would not quite work out just now), and ii) nobody will actually go to prison, we have one question: just which umbrella agreement with US prosecutors will UBS use for that "other other other" market UBS was most recently caught rigging: gold.
Actually, if UBS made the price of gold drop with its gold-rigging, it may well be that the Swiss bank just may get a commendation by the US DO"J" for that one.