- NEW YORK (Reuters)
- Federal authorities have charged 47 people, netted in a sting operation
dubbed "Wooden Nickel," with running a scam in the foreign currency
market that defrauded retail investors and big Wall Street firms of millions
of dollars.
-
- The latest scandal to hit Wall Street involves charges
related to stock and wire fraud, extortion, kickbacks, rigged trading,
money laundering, guns and cocaine. The schemes included phony trades and
fraudulent or non-existent investments to con small investors into thinking
they were getting a piece of a market generally beyond their reach.
-
- The Federal Bureau of Investigation's 18-month operation
used one undercover agent posing as a hedge fund manager who operated in
the industry and provided recordings of the suspects.
-
- One scheme, known as the "Game" or "Points
for Cash," involved rigged trading that allegedly pervaded the interbank
foreign exchange market for at least 20 years, prosecutors said.
-
- "Today's charges run the gamut of fraud. With more
than 1,000 victims from small investors to large banks, the losses are
in the millions," U.S. Attorney for the Southern District of New York
James Comey said at a news conference at his offices in lower Manhattan.
-
- Defendants named in the sting included employees of J.P.
Morgan Chase, Societe Generale, UBS AG, the Dresdner division of German
insurer Allianz, Israel Discount Bank, Tullet Liberty, Tradition North
America, ICAP Plc. and a former member of the New York Federal Reserve's
private-sector foreign exchange committee.
-
- The committee is an ad-hoc group of financial industry
professionals that sets "best practice" policies for the industry,
but it is not formally connected to the bank.
-
- "Some of the world's biggest biggest banks were
scammed by corrupt players inhabiting every level of the forex interbank
market," Comey said.
-
- The large banks, which do not face charges themselves,
were informed of the investigation only a few days ago in order to protect
the undercover agent, Comey said.
-
- He said it was not possible to give a total value of
the banks' losses in rigged trades. But in the course of a six-month period,
the investigation discovered 123 trades in which the winnings for the "bad
guys" was $650,000, he said.
-
- "But we also learned during this investigation that
this had been going on far and wide for over 20 years, so the imagination
runs wild in terms of loss," Comey said.
-
- The investigation is ongoing, and not all suspects have
been apprehended, a Justice Department spokesman said.
-
- BANKS AND BOILER ROOMS
-
- In the case of the large banks, law enforcement officials
alleged foreign exchange brokers at the institutions defrauded their employers
by steering losing trades to corrupt outside brokers who then "kicked
back" part of the profits from the pre-arranged trades to the bank
employee.
-
- In cases involving retail investors, smaller currency
trading firms, including Madison Deane & Associates, New York Capital
Assets, Inc., ISB Clearing Corp, Oxford Capital Group LLC -- identified
as "boiler room" operations -- would deceive retail investors
by selling them fake investments and pocketing the cash, the government
said.
-
- Included in the complaint were allegations that some
Madison Deane employees "each purchased expensive Rolex watches"
with customers' money. Madison Deane allegedly solicited at least $2 million
in retail customer funds from the fall of 2001 through early 2003, but
had no ability to conduct currency transactions.
-
- Damon Ripley, who controlled New York Capital, was charged,
along with Berman Toro, with conspiring to buy 10 kilograms of cocaine
and to distribute 5 kilograms of the drug. Ripley was also charged with
illegal possession of a firearm, having been convicted of a weapons felony
in 1991.
-
- Over 200 FBI agents fanned out across the United States
to make arrests starting on Tuesday afternoon in New York, New Jersey,
Connecticut, Colorado, Florida, and Tennessee, said Comey.
-
- HANDCUFFS AND SUITS
-
- In one instance, handcuffed, well-dressed individuals,
some with their heads covered, were led from New York's 2 World Financial
Center, having gathered on Tuesday evening for drinks before heading to
Atlantic City, New Jersey, on a gambling spree, officials said.
-
- As a result of the sting operation, charges were also
filed by the Commodity Futures Trading Commission and the Securities and
Exchange Commission. They included commodities fraud charges against several
currency trading firms.
-
- The SEC filed a civil action charging United Currency
Group Inc. and its chief executive officer, Adam Swickle, with securities
fraud. It said Swickle was charged with raising over $700,000 from 21 investors
by selling worthless stock in his purported currency trading firm, United
Currency Group.
-
- Nearly all the firms named were contacted by Reuters
and offered either "no comment" or distanced themselves from
the individuals charged, saying the banks were not part of the criminal
activities.
-
- While the $1.2 trillion-a-day foreign exchange market
has no government regulator, large financial institutions have in recent
years stepped up compliance requirements for their traders.
-
- Gregory Mocek, the CFTC's enforcement officer, said there
are no plans to try to regulate the larger interbank currency market. "That's
something for Congress to decide," he said in response to a question
from Reuters.
-
- © Copyright swissinfo SRI
-
- http://www.swissinfo.org/sen/Swissinfo.html?siteSect=143&sid=4469819
|
