FX manipulation lawsuit reaches the UK, as testimony of ex-Citi FX trading desk director needed
The Forex scandal evolving around chats in rooms named “The Cartel,” “The Bandits’ Club,” and “The Mafia” is far from over. A group of plaintiffs suing a raft of major banks for FX market manipulation have now expanded the scope of the lawsuit (at least in terms of discovery).
On November 6, 2020, Judge Lorna G. Schofield of the New York Southern District Court granted a motion for issuance of a Hague Convention Request for International Judicial Assistance to Take Testimony Overseas.
FX News Group has examined a raft of documents associated with this request and has learnt that it concerns the testimony of Carly Hosler, a former Director of the FX Spot Trading Desk at Citigroup, a position located in London. The New York Southern District Court seeks the assistance of the appropriate judicial authority of England for obtaining evidence to be used at trial.
The plaintiffs in this case allege that the defendants, including Citigroup, conspired to fix FX prices and otherwise manipulate the FX market from a period beginning at least as early as January 1, 2003 through December 31, 2013, in violation of U.S. antitrust and commodities exchange laws. Specifically, Plaintiffs allege that the defendants’ agreement encompassed:
- (a) improperly sharing confidential client and trading information, including prices;
- (b) front running client orders;
- (c) triggering of contingent FX contracts;
- (d) coordinating or manipulating bid/ask spreads quoted to customers; and (e) manipulating FX benchmark rates, such as the WM/Reuters and ECB benchmark rates.
Plaintiffs allege that Defendants used electronic chat rooms with evocative names such as “The Cartel,” “The Bandits’ Club,” and “The Mafia” in furtherance of the conspiracy. The plaintiffs allege that each defendant (major banks such as Credit Suisse, Goldman Sachs, Bank of America, and Citi) participated in chat rooms discussing multiple currencies. The plaintiffs allege that over time, various chat rooms, in furtherance of the conspiracy, evolved to discuss numerous currency pairs beyond those for which they were originally established.
Ms. Hosler participated in numerous multibank chat rooms with FX traders from other defendant banks, including without limitation, Credit Suisse, Bank of America/Merrill Lynch, BNP Paribas, HSBC, Standard Chartered, JPMorgan, Deutsche Bank, Barclays, and UBS.
At least one of the individuals with whom Ms. Hosler participated in a chat room during the class period was an FX trader from non-settling defendant Credit Suisse.
Ms. Hosler’s testimony is necessary to determine at trial the meaning of her communications and her knowledge of the conspiracy. Ms. Hosler’s testimony regarding her chat room communications is relevant to explain numerous multibank chats in which she participated because FX traders have their own unique jargon that is difficult to interpret.
Ms. Hosler’s testimony also is necessary to explain communications through other media for which written evidence may not exist, such as text messages and phone calls.
Ms. Hosler’s testimony regarding her knowledge of compliance issues is relevant for trial because Plaintiffs intend to prove either that Defendants lacked compliance measures to prevent the conspiracy and/or knew of violations of compliance policies and failed to prevent them.
Ms. Hosler’s testimony regarding her own profit and loss in foreign exchange is relevant to show a motive to conspire and injury to the plaintiffs.
Below are excerpts of the chats:
Let’s note that, in her own Employment Tribunal action against her former employer, Ms. Hosler asserted that the breach of client confidentiality for which she had allegedly been fired was actually “the norm as expected, encouraged, condoned, and indeed rewarded by management.”
She further stated, “I have always maintained that I only ever did my job as encouraged and condoned by management, who did not put any explicit rules in place regarding participation in market chats until 2013,” which was at the end of the class period.
In her former supervisor’s Employment Tribunal claim, Ms. Hosler also provided a statement wherein she said, “we were actively encouraged and required to build and maintain close two-way relationships with traders at other banks in order to gain information about market flows and colour.”
The examination of Ms. Hosler will not, in the opinion of the New York Southern District Court, be oppressive to Ms. Hosler in all the circumstances and bearing in mind the protections available to her. The U.K.’s Serious Fraud Office has closed its criminal investigations into allegations of fraudulent conduct in the FX market. While the U.S. Department of Justice (“DOJ”) may have ongoing investigations involving conduct in the FX market, Ms. Hosler is outside of the terms of the stay of depositions sought and received by the DOJ in the New York Southern District Court.
Finally, Ms. Hosler’s deposition will proceed under the terms of the protective order and, therefore, will be given confidential treatment in connection with this litigation.