Goldman Sachs

Goldman Sachs to pay US$110m to settle claims traders shared client info, including trades made by a person nicknamed ‘Satan’

Traders reportedly shared private investor information with those from other banks, including details on how a client nicknamed ‘Satan’ was trading US dollars for Euro

PUBLISHED : Wednesday, 02 May, 2018, 1:39am
UPDATED : Wednesday, 02 May, 2018, 1:48am

Goldman Sachs Group Inc. has agreed to pay about US$110 million to resolve allegations that its foreign exchange traders improperly shared information about client orders on an electronic chat room, putting clients at a disadvantage. 

A consent order filed with DFS covers activities in the foreign exchange unit from 2008 to 2013. One Goldman forex employee, referred to as “Trader 1”, frequented a chat room with traders from other banks, where he picked up tips on what certain large investors were doing in the forex markets, according to the order.

On occasion, Goldman’s trader told others about a trade involving his clients, including an investor nicknamed “Satan”, and in August 2008, wrote “Satan sells 8 euros at 17.” The message indicated that the client was making a US$8 million trade between Euros and US dollars at a specific price.  

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The conduct continued even after a Goldman salesperson wrote to the trader in 2009, warning him not to share confidential client information with other forex traders.

“Are they getting something from you by keeping you engaged?” the salesperson wrote. Despite the warning, the salesperson did not escalate his concerns to Goldman’s compliance team, according to DFS. 

“DFS’s investigation revealed that certain Goldman traders exploited the company’s ineffective oversight of its foreign-exchange business by improperly sharing customer information,” said Maria Vullo, superintendent of the DFS. 

The firm will pay roughly US$55 million each to New York’s Department of Financial Services and the Federal Reserve Board. As part of its settlement, Goldman Sachs Bank USA, the state-chartered unit overseen by the New York agency, will provide its regulators with a plan to improve its internal controls and compliance programme. 

The resolution comes years after a far bigger wave of penalties tied to foreign-exchange trading by other global banks. In a May 2015 action against six banks related to manipulation of foreign currencies, federal authorities extracted five guilty pleas and $5.8 billion in penalties. 

That same year, Goldman Sachs and eight other banks agreed to pay about US$2 billion among them to settle a class-action suit in New York over currency manipulation. 

The Federal Reserve, in a statement announcing the action, said Goldman “failed to detect and address its traders’ use of electronic chat rooms to communicate with competitors about trading positions, including around benchmark fixes, and failed to detect and address the disclosure of confidential client information.” 

Goldman Sachs said in a statement that it was pleased to have resolved the reviews and that the Fed and DFS had recognised the bank has “already taken significant steps to enhance our policies and procedures.”  

The firm’s penalty was smaller than those the New York state regulator has levied for currency-trading conduct on other banks chartered in the state.

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Barclays Plc paid US$485 million in 2015 to settle allegations of manipulating spot currency markets. The state regulator hit BNP Paribas SA last year with a US$350 million penalty over its conduct on exchange markets. 

Goldman also won’t have to hire an outside monitor, a condition sometimes imposed on banks fined for compliance violations.

DFS’s US$135 million foreign-exchange settlement last year with Credit Suisse SA, for example, required the bank to hire an outside consultant to review its practices. 

The DFS’s look into forex-rigging dates back more than four years. In early 2014, then-DFS chief Benjamin Lawsky asked more than a dozen banks, including Goldman Sachs, for documents relating to their currency trading practices. 

Federal authorities are continuing to pursue charges against individual traders from some of the global banks that reached big federal settlements.

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Ex-JPMorgan Chase & Co. trader Richard Usher, former Citigroup Inc. trader Rohan Ramchandani and ex-Barclays Plc trader Chris Ashton were charged in January with conspiring to rig foreign-exchange markets, using an electronic chat room known as “The Cartel” to share information. 

The three British traders are arguing for the dismissal of charges in federal court in New York.