Goldman Sachs has been slapped with a $110 million fine by New York regulator and Federal Reserve in an antitrust lawsuit alleging that the bank’s traders routinely manipulated the forex market for their profit.
New York’s Department of Financial Services also ordered the investment bank to put in place a program to ensure that the alleged violation doesn’t happen again. However, Goldman is not required to hire an outside consultant to review its practices, a condition sometimes imposed on banks fined for compliance violations.
The DFS said Goldman Sachs had insufficient oversight and controls over its FX traders, who allegedly discussed trading positions with competitors, using electronic chatrooms. The traders frequently tried to trade ahead of big foreign-exchange transactions by their clients, a practice known as front-running.
The order released Tuesday detailed multiple instances of improper behavior, which occurred from at least 2008 to 2015.
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In one example cited by DFS, Goldman Sachs’s traders shared confidential information about foreign exchange orders placed by a customer referred to as “Satan.” One of the bank’s employees wrote, “Satan sells 8 euros at 17,” which indicated that the client was making an $8 million trade on EUR/USD pair at a specific price.
Elsewhere, traders in the bank used a tactic called ‘building ammo,’ where they improperly shared customer information on trading certain currency pair to ensure that they were not taking positions that would hurt one another.
Tuesday’s action is the latest step taken by the US authorities as part of a long-running crackdown on price-fixing across FX markets, in which several lenders have already pleaded guilty to conspiring to manipulate currency prices.
Other banks have also faced large fines for allowing their traders to club together to rig prices in FX markets. Last year, five banks – Credit Suisse, Barclays, Royal Bank of Scotland, Citigroup and JP Morgan Chase – pleaded guilty to conspiracy to rig the foreign exchange market and fines totaling $5.8 billion were handed down by the US Department of Justice.
Maria Vullo, superintendent of the DFS, commented: “DFS’s investigation revealed that certain Goldman traders exploited the company’s ineffective oversight of its foreign-exchange business by improperly sharing customer information.”