New York regulator expands currency manipulation inquiry

New York’s top banking regulator has demanded documents from more than a dozen banks, opening a new front in the global investigation into alleged foreign exchange manipulation.

Ben Lawsky, superintendent of New York's Department of Financial Services (DFS), sent requests to banks including Deutsche Bank, Goldman Sachs, Lloyds, Royal Bank of Scotland and Standard Chartered, one person familiar with the matter said. All the banks declined to comment on whether they had been contacted.

The intervention by Mr Lawsky comes just a day after the UK’s financial watchdog said allegations that traders colluded to rig prices in the $5.3 trillion spot market were “every bit as bad” as Libor rigging claims, which have resulted in more than $6 billion of fines, prompting fears that the currency manipulation scandal is spiralling out of banks’ control.

The sprawling investigation is adding to the considerable woes of global banks’ forex desks, which are under severe pressure as top traders leave amid rapidly falling revenues, intense regulatory scrutiny and a further push towards electronic trading.

Yesterday, it emerged that a Buenos Aires-based trader has left Deutsche Bank in relation to the probe, drawing the South American continent into the scandal. Deutsche has also fired three bankers – emerging markets trader Diego Moraiz, and directors Robert Wallden and Christopher Fahy – in connection with the investigation, according to two people familiar with the situation.

Mr Wallden, who was already suspended, was approached last November by the Federal Bureau of Investigation with copies of electronic conversations in which he had boasted that he could move markets. People close to the bank explained this as a misunderstanding at the time. Mr Wallden could not be reached for comment.

The departures from Deutsche bring the tally of traders suspended, placed on leave or fired across nine banks to 21.

Separately, Goldman Sachs and Citigroup announced the departure of veteran currency traders.

Steven Cho, head of G10 spot and forwards trading at Goldman Sachs, and Leland Lim, co-head of macro trading for Asia Pacific, excluding Japan, left the bank, people familiar with the situation said. A person familiar with the bank said the partners had retired. The bank declined to comment. Mr Cho and Mr Lim could not be reached for comment immediately.

Their departures come ahead of a new partnership class this year at Goldman Sachs and during peak season for voluntary job changes in finance, which typically happen after traders have collected their bonuses.

Citigroup’s global head of foreign exchange, Anil Prasad, who has been with the bank for 28 years and once labelled “the world’s most powerful fx banker” will leave Citigroup in March, the bank said in an internal memorandum.

Mr Prasad’s departure is personal and unrelated to the currency probe, a person familiar with the situation said yesterday. His successor is expected to be announced in the coming weeks.

Mr Lawsky, a former US prosecutor, first made his mark as a regulator in 2012 when he led a solo chase of StanChart, charging it with allegedly violating US sanctions before federal authorities had even completed settlement talks with the UK bank.

He joins an already sprawling investigation that includes the US's Department of Justice and Commodity Futures Trading Commission, the UK's Serious Fraud Office and Financial Conduct Authority, and numerous other country regulators in Europe and Asia.
– (Copyright The Financial Times Limited, 2013)