US federal investigators yesterday said 47 people would face criminal charges after a probe into fraud in the New York foreign exchange market.
Prosecutors said they had uncovered "a staggering array of criminal conduct" during an investigation that culminated in a series of raids and arrests on Wall Street late on Tuesday.
US district attorney Mr James Comey said 47 people involved in the alleged fraud were facing criminal charges after the 18-month investigation. They include employees of JP Morgan Chase, Société Générale, UBS, Dresdner Kleinwort Benson and Israel Discount Bank, as well as a former member of the Federal Reserve Bank's foreign exchange committee.
Individuals at the banks were charged but the banks themselves were not accused.
Arrests were made in the World Financial Centre in lower Manhattan, Jersey City, New Jersey, and Stamford, Connecticut. Agents of the Federal Bureau of Investigation hauled out well-dressed men in handcuffs from various locations in the late-afternoon raid.
The banks were informed a few days ago in order to protect the undercover agent, the US attorney said.
Mr Comey alleged the probe, dubbed "Wooden Nickel", uncovered two separate and "equally far-reaching" fraud schemes, whose victims included both major banks as well as more than a thousand small investors.
"Some of the world's biggest banks were scammed by corrupt players inhabiting every level of the forex interbank market," Mr Comey told a news conference.
He said the large banks had been targeted by "corrupt currency traders" who took payoffs to steer their employers into losing currency trades that were set up by corrupt brokers.
During a six-month period the FBI undercover operation had discovered details of 123 fraudulent trades, which produced illegal profits of more than $650,000 (€547,000). The investigation suggested these kinds of trade had "been going on far and wide for over 20 years".
In the second scheme, Mr Comey said more than 1,000 small investors lost "millions of dollars" when they were conned "by classic boiler-room operations with fancy sounding names" into supposedly investing in forex trades.
"They were told their moneys would be carefully invested in currency trades, earning them big profits, and that these investments were for ordinary folks who were looking for investments... that were safer and more predictably profitable than the stock market," he said.
Mr Comey said the frauds, perpetrated by "sharks" operating in the forex business illustrated the potential risks to small investors.
Among those charged were Mr Stephen Moore, chief executive of Itrade, a foreign exchange broker, who previously served on the Fed's foreign exchange committee. Employees of several money brokers, including ICAP, Tullett Liberty and Madison Deane, were also arrested.
Shares in two UK brokers - ICAP and Collins Stewart Tullett - slipped yesterday after they confirmed that their employees had been among those arrested made by the FBI.
In a separate investigation, the Commodity Futures Trading Commission and the Securities & Exchange Commission (SEC) filed charges including commodities fraud charges against several currency trading firms.
The SEC filed a civil action charging United Currency Group and its chief executive, Mr Adam Swickle, with securities fraud. The SEC said Mr Swickle is charged with raising more than $700,000 from 21 investors by selling worthless stock in his purported currency trading firm, United Currency Group.
