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Five banks plead guilty to Forex-manipulation charges and pay $2.5 billion

The guiding philosophy of a number of banks in the foreign currency exchange markets seems to have been, “If you ain’t cheating, you ain’t trying,” as one Barclays executive wrote in a online chat.

At least five major banks – Citicorp, JPMorgan Chase, Barclays, The Royal Bank of Scotland and UBS – “tried” hard. The US Justice Department announced today that those banks have agreed to plead guilty to felony charges of conspiring to manipulate the foreign currency exchange market and pay a total of $2.5 billion in criminal fines.

Between 2007 and 2013, bank traders known as “The Cartel” used private chat rooms and coded language to manipulate US and euro exchange rates to increase their profits. The traders withheld bids and offers for the dollar and euro to manipulate the supply or demand for the currency, suppressing competition.

Barclays has agreed to an additional $60 million criminal penalty for violating a 2012 non-prosecution agreement that resolved the Department of Justice’s investigation into previous LIBOR and other interest rate manipulation. UBS has also agreed to a $203 million criminal penalty for violating the same non-prosecution agreement set by the DOJ.

All five banks have agreed to a three-year corporate probation where they will be required to report regularly to authorities and cease all other criminal activity.

It was an expensive day for Barclays. The bank also paid $400 million to settle charges brought by the Commodity Futures Trading Commission for attempted manipulation, false reporting and helping other banks manipulate global foreign exchange benchmark rates.

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