47 charged in foreign exchange trading sting

By Ben White
Washington Post

NEW YORK — Federal prosecutors yesterday filed criminal charges against 47 traders and brokers, including a former private-sector adviser to the Federal Reserve Bank of New York, for allegedly taking part in a series of foreign exchange trading schemes that cost banks and investors millions of dollars.

The accused include employees of big Wall Street firms including J.P. Morgan Chase & Co., and UBS, as well as of obscure "boiler room" operations.

In addition to low-level brokers and traders, prosecutors filed charges against Stephen Moore, chief executive of ItradeCurrency, who had served on the Fed's Foreign Exchange Committee.

Jim Comey, U.S. attorney for the Southern District of New York, said the charges grew out of an 18-month sting operation. The charges center on two distinct schemes.

In the first, prosecutors allege that 20 individuals took part in a fraud known in the industry as the "Game," or "Points for Cash." Prosecutors said that under this scheme, which had been going on for at least 20 years, traders at large banks, including J.P. Morgan and UBS, engaged in fraudulent trades designed to produce losses for the traders' firms and profits for the traders' clients. The traders then allegedly received kickbacks from their clients.

The second set of charges targeted foreign exchange "boiler rooms." Prosecutors charged more than a dozen people with setting up these fraudulent firms and soliciting money from individual investors, ostensibly to be used for currency trades. Prosecutors said the money was instead transferred to accounts controlled by the boiler-room operators.