Three British Traders, Chris Ashton of Barclay’s Plc, Rohan Ramchandani of Citigroup, Inc and Richard Usher of JPMorgan Chase & Co, were acquitted of charges brought by the United States Department of Justice late October of this year. They were accused of scheming to rig exchange rates on the Foreign Exchange. The charges were brought in Manhattan federal court with the Sherman Act as the basis for the charges. The Sherman Act is a federal anti-trust law designed to check the existence of and making of monopolies in industries that create, sell, and distribute goods.
Any obstruction of free trade falls under the Sherman Act. The Foreign Exchange serves to decentralize the market for currency trading and determines the exchange rate for all foreign currencies as well as the prices at which those currencies are bought and sold. By supposedly rigging the foreign exchange market through insider sharing of information, the three currency traders were exposed to these U.S. laws; the nexus of the case was not limited to Britain due to the international ramifications of the charges brought against Ashton, Ramchandani and Usher.
Prosecutors from the U.S. Department of Justice brought charges of collusion to influence the trading rates of euros to dollars from 2007 to 2013. The men admitted to trading this information in chatrooms on the Bloomberg messaging system, calling themselves “the cartel.” Through their lawyers, the three stated that the flow of information between them was lawful and that the behaviour is a standard part of their business.
The other key element of the traders’ defence is that the charges brought against them did not demonstrate a clear victim, or show of damage. The case against Ashton, Ramchandani and Usher only stipulated for the “hypothetical damage to the value of interstate transfers of dollars” but could not produce an actual victim. Any of the traders’ clients who may or may not have borne the brunt of the traders’ actions were not considered in the charges.
Nonetheless, the acquittal of the three traders was a surprised; the Department of Justice has a successful prosecution rate of over 85% and the political and economic climate in the United States at the time the charges were brought reasonably set expectations for another triumph for the DOJ.
But the acquittal of Ashton, Ramchandani and Usher does not necessarily mean that there wasn’t any wrongdoing, or that there isn’t room for a serious overhaul of the ForEx. It only means that the Sherman Act was not violated. It should be noted that the three traders were fired from their jobs once it was known that they were trading information through “the cartel” and that their actions as well as other in their field have led to the UK Financial Conduct Authority cracking down on all areas of conduct in banking. The UKFCA investigation led to approximately 850bn euros in fines for large banks. Legal eyes including solicitors in Prestwich will watch this with interest.
The three members of the cartel have eluded jail sentences, and hopefully the investigation that led to charges being brought against them will serve as a cautionary tale to bankers and traders in the near and distant future.