Five banks will pay the Department of Justice nearly $3 billion in fines and penalties for their manipulation of U.S. dollar and Euro exchange rates, which the DoJ characterized as occurring “almost every day for five years” through private chat rooms, benefiting their trading positions but harming countless consumers and investors around the world. Separately, the Federal Reserve said on Wednesday, six banks would pay a total of $1.8 billion in fines for “unsafe and unsound practices” in the FX market.
Starting in 2007, traders at banks involved in Wednesday’s settlement formed what they called “The Cartel” to fix daily foreign exchange crosses in currencies as prominent as the dollar and euro so that they’d be able to tilt currency movements in their favor. Using coded language and group instant message chats on their Bloomberg Terminals, the traders and their colleagues worked to influence daily rate settings in the forex market by either bidding up some currencies or withholding markets in others at the close of business.
“For more than five years, traders in “The Cartel” used a private electronic chatroom to manipulate the spot market’s exchange rate between euros and dollars using coded language to conceal their collusion. They acted as partners – rather than competitors – in an effort to push the exchange rate in directions favorable to their banks but detrimental to many others,” US Attorney general Loretta Lynch said at a Wednesday press conference.