JPMorgan Chase & Co.: The Rival Dealers in the Same Chat Room

The JPMorgan FX antitrust case exposed a scheme to fix prices and rig bids for U.S. dollars and euros in the spot market. JPMorgan Chase & Co. agreed to plead guilty to that conspiracy. In its account of the criminal plea agreements, the Justice Department described rival traders using a private chat room to coordinate trading and protect one another’s positions. Sometimes the agreement called for trading together. Sometimes it called for staying out of the way. An insider who understood the messages could explain why an expected bid or offer never appeared.

JPMorgan’s participation ran from at least as early as July 2010 through January 2013. The Justice Department announced the agreement on May 20, 2015, and its case page identifies the corporate defendant as JPMorgan Chase & Co. The conduct was cooperation among dealers whose banks were supposed to compete.

How an FX Fix Became a Customer’s Price

An FX fix gives customers a reference rate for pricing currency orders. The Justice Department’s account of the plea agreements explains that third parties collect trading data at designated times, calculate a daily fix rate and publish it. Many large customers have orders priced using that rate. Those customers paid a rate the traders were working together to rig.

The Justice Department’s account of the criminal plea agreements described coordination around the 1:15 p.m. European Central Bank fix and the 4:00 p.m. World Markets/Reuters fix. Traders coordinated purchases and sales of dollars and euros in an effort to move the benchmark rates and increase their profits. The rate a customer relied on came from trading that the participants were working together to influence.

For someone familiar with a desk’s activity, the revealing connection is between a communication and the trading it concerned. A message about buying or selling around a fix takes on meaning alongside the relevant trades and the customer orders priced from that benchmark. We look at that connection with the insider who knows what the desk was doing.

The Agreement to Withhold Bids and Offers

The criminal plea agreements described another way the traders helped each other: they agreed to withhold bids or offers so that the exchange rate would not move against a fellow participant’s open position. An open position gave that trader a financial interest in the rate’s direction. A rival willing to stop buying or selling could help protect it.

The Justice Department said these traders called themselves “The Cartel” and used an exclusive electronic chat room and coded language. That communication connected competing banks’ trading decisions. The participants could coordinate market activity around a fix or coordinate the absence of activity when a position needed protecting.

Withholding a bid or offer removed supply or demand from the market. According to the plea agreements, that was how traders protected one another’s positions and suppressed competition. The decision to do nothing could be the agreed act. A trading record can show the gap. A chat message can explain whose position it was meant to protect.

An employee who understood the desk’s shorthand can explain a message that looks obscure to someone outside the business. That knowledge matters when the conduct described in the plea expressly relied on coded communication. The words, their meaning within the desk and the decision that followed belong together.

What JPMorgan’s Corporate Plea Covers

JPMorgan’s agreement covered a conspiracy to fix prices and rig bids in dollar-euro spot trading in the United States and elsewhere. In the same announcement, the Justice Department said Citicorp, Barclays and Royal Bank of Scotland had also agreed to plead guilty to that FX conspiracy.

In its account of Royal Bank of Scotland’s separate criminal plea, the Justice Department dated that bank’s participation from at least as early as December 2007 until at least April 2010. The banks shared a method of suppressing competition.

What Is the Role of Whistleblowers in Bid Rigging Cases?

Whistleblowers can supply the communications and business knowledge that explain an agreement among competitors. In an FX case built around coordinated trades and withheld bids, someone who knows the desk may connect a message to a position, a customer order or a decision to stop competing at a particular moment.

A trader may understand the position being protected. A colleague who reviews communications may understand the shorthand or the context of a competitor contact.

Private FX Settlements Address Customer Claims

The private foreign-exchange benchmark litigation addressed an alleged bank conspiracy to fix currency prices. A federal court described a settlement fund totaling $2,310,275,000 across fifteen settlement agreements. That money addressed customer claims about the prices they paid.

Those claims sought compensation for injured purchasers. An insider’s contribution is different: knowledge of the agreement and the records showing how it operated. A customer may recognize the effect of a currency price on its transaction, while a person inside the bank may understand the communication behind a trading decision. We focus on what that inside account can establish and which whistleblower case it can support.

What Is the Antitrust Whistleblower Rewards Program?

The Antitrust Division’s whistleblower rewards program can pay rewards to eligible whistleblowers. We assess whether your information fits it.

For an FX insider, that assessment begins with the agreement the communications reveal and the trading decisions they explain. We work through the reward program, your role and any overlapping financial-market issues with you, and our whistleblower experts bring in antitrust whistleblower lawyers to address the FX trading and reporting issues.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We determine with you whether the conduct also involves false claims for government payment and how your evidence connects to the payment and the conduct behind it.

You Know What the Desk Meant

Bring our whistleblower experts the JPMorgan trading communication and the position or fix-window order it was meant to protect.