Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M

Credit Suisse AG (CS) has agreed to settle currency rigging charges brought by New York’s Department of Financial Services by paying $135M. According to the state regulator, from at least ’08 to ’15, the Zurich-based bank violated NY banking law and engaged in other “unlawful conduct” that “disadvantaged customers.”

The consent order states that Credit Suisse did not put into place controls over its FX business that were “effective.” Also, its traders are accused of the “inappropriate sharing” of information with other banks that could have resulted in exchange rate rigging, coordination of trades, and a rise in the “ bid/ask spreads” that were offered to the bank’s forex customers. The DFS probe said that these actions were geared toward creating more profit for Credit Suisse, while decreasing its losses and harming not just its own customers but the marketplace. Meantime, other banks that it may have colluded with also sought to profit.

Credit Suisse is one of several banks whose traders are accused of gathering in chat rooms to rig currency prices. According to Bloomberg, traders from Barclays PLC (BARC), JPMorgan Chase & Co. (JPM), and Citigroup (C) are waiting for their trials over allegations that they sought to manipulate currencies. To date, banks accused of currency rigging have paid $5.8M to the US Justice Department to settle charges.

NY’s probe said that from April ’10 to June ’13, Credit Suisse looked to take part in the front-running of clients’ “limit and stop-order losses” by way of an algorithm that seems to have been created to trade before customers placed their orders. Front-running entails using the information in a customer order to “improperly” trade prior to that order while knowing that the order will likely affect pricing.

The New York regulator contends that from at least January ’12 to December ’15, Credit Suisse implemented “improper practices” when using its eFX electronic trading platform. This included “improperly” putting into place a delay function for filing customer orders to enhance its profits, which sacrificed a “transparent, competitive model.”

Meantime, the bank is accused of not doing an adequate enough job of making sure clients were aware that certain trades were turned down due to this delay function. Instead, clients were told that an “error” had occurred instead of that their trades were purposely rejected to keep Credit Suisse from sustaining financial losses. The Consent Order also cited one example of a credit Suisse trader helping a customer to “improperly affect prices.”

Also, the bank’s traders are accused of “building ammo,” which involved traders from different banks assigning a person at each institution to take care of their forex trades through a fixing window. This gave that trader the authority to exceed market power and manipulate certain currency prices.

The New York regulator currently is probing other banks and their use of electronic trading platforms. In 2015, Barclays settled similar charges with the DFS for $485M.

Despite settling, Credit Suisse is not admitting wrongdoing. Aside from paying $135M, it will retain an outside consultant to examine its practices. It hired another outside monitor in 2014 after admitting to assisting us citizens in avoiding paying taxes. This year, the DOJ appointed that same monitor in its settlement with the bank over residential mortgage-backed securities sales.

If you suspect that your losses are due to securities fraud, contact The SSEK Partners Group today.

The Consent Order in the NY Regulator’s Case Against Credit Suisse (PDF)

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