Standard Chartered has agreed to pay $40m in fines to settle claims from US authorities that the UK bank was involved in chat rooms called the “Old Gits” and “Butter the Comedian” that tried to manipulate the price of emerging markets currencies.
The penalty comes as banks hope to put the pain of currency trading fines and lawsuits behind them, some five years after allegations first surfaced about benchmark and exchange rate manipulation attempts at some big lenders. In recent years the fixing scandal has cost dealers more than $10bn in regulatory fines and has resulted in both civil and criminal cases in the US.
The New York Department of Financial Services said this week that the bank engaged in “unsafe, unsound and improper conduct” in its foreign exchange business between 2007 and 2013, as traders sought to co-ordinate and manipulate prices with peers at other banks and moved EM currency prices to benefit the bank and to the detriment of clients.
Some of this activity was conducted through the Old Gits chatroom, which one trader also referred to as a cartel “like Opec but poorer”, while another member described the group as a “den of thieves”. The chatroom included at least three Standard Chartered traders, the settlement document said.
“I think we need an Old Gits meeting to discuss good olé [South African rand] manipulation. We should be able to bully people now far more than any other [currency],” said one trader in the chatroom in January 2008.
Another chatroom, the so-called Butter the Comedian group, schemed to manipulate prices in non-deliverable forwards — a common type of contract for certain EM currencies. Members of the group “devised a scheme to collude” with local Brazilian bank traders to raise the prices customers paid for the real, the settlement said.
“[W]e are trying to gain unfair advantage over competitors, provided by a market distortion,” said one group member.
Evidence from chat rooms have been at the heart of regulatory fines for currency dealing banks and also provided grounds for criminal prosecutions of former traders.
Mark Johnson, former head of currencies at HSBC, was found guilty by a New York jury in October 2017 for defrauding a client over a trade, a verdict he is appealing. Three other traders, Richard Usher, formerly of JPMorgan Chase; Rohan Ramchandani, formerly of Citigroup; and Christopher Ashton, formerly of Barclays, were acquitted for similar charges in a US trial last year.
The penalty is the first fine for Standard Chartered in relation to its currencies trading and sales business, but it is not its first run-in with US authorities. Regulators, including the US Department of Justice, are seeking to impose fines of about $1.5bn on Standard Chartered because of alleged sanctions breaches involving Iran-based clients of its Dubai branch. A bank spokesman said the fine for FX failings was “unrelated to the ongoing sanctions investigation by the US authorities into historical conduct and controls issues, which was first disclosed in 2014”.
“Since the conduct at issue took place, Standard Chartered has remediated its systems and controls, and now has an appropriate control framework in place,” said a spokesperson for the UK bank.