The Goldman Sachs Group has agreed to pay around $110 million to try and resolve any allegations. The existing allegations are stating that those who work on the Foreign Exchange Market haven’t shared the right information about their client orders. This is especially the case on electronic chat rooms. This puts clients at a serious disadvantage and it also makes it much harder for them to be successful in their trading as well. The firm are going to pay around $55 million into the NY Department of Financial Services. The idea here is to try and settle the case. The state-chartered unit is overseen by the NY agency at the moment and they are going to try and provide any regulators who work there with the chance to improve their programs.
The resolution actually comes years after a bigger wave of punishments were tied to the Forex industry. In May 2015, action was taken against a total of six banks and they were all related to the manipulation of Forex. Federal authorities worked hard to try and extract five guilty pleas and they also charged well over $5.8 billion in penalties as well. Goldman Sachs and around eight other banks then paid $2 billion to settle the class action suit. They did this in New York and ever since then, the idea of currency manipulation has become much more apparent.
A consent order was also filed with DFS and they cover all of the activities in the Forex unit. They did this from 2008 to 2013. An employee from Goldman referred to as Trader 1 kept on going into chatrooms with various traders. They then talked with traders from other banks and they also picked up on various tips as to what some investors were doing. They then took this information back to the market. On one occasion Goldman’s own traders told the other people in the group about a potential trade involving one of his own clients/ he nicknamed this client as being Satan.
In August 2008, electronic conversations show that the Goldman trader wrote that Satan sells around 8 Euros for 17. This indicated the fact that the client was planning on making a trade for $8 million between Euros and USD. They were also going to do this at a specific time as well.
The conduct went on even more when Goldman wrote to the trader again in 2009. They warned him to stop sharing information with other people and that client information was completely confidential. They questioned whether or not he was gaining something by keeping them engaged and the salesperson then wrote that he chose not to escalate any current concerns to the team who work in compliance.
The DFS investigation then revealed that Goldman traders worked to try and exploit the ineffective oversight that is the foreign exchange business and that he did this by sharing customer information.
The Federal Reserve then announced the action. They said that Goldman did not detect or even address the fact that electronic chat rooms were being used to communicate with other people about trading or even positions. They also stated that benchmark fixes were also not being detected and that confidential information was being disclosed.
Goldman Sachs has stated that he was pleased to have resolved the situation and that the FED and the DFS have recognised the fact that they have already taken very large steps in trying to enhance the policies and even the procedures that are present.
When you look at the bigger picture, it isn’t hard to see that Goldman’s penalty wasn’t half of what other people’s were. The New York regulator has also tried to levy for currency trading conducts and so far Barclays have paid $485 million to settle allegations regarding money or currency manipulation. Goldman doesn’t actually have an outside monitor and this is a condition that is often imposed on banks who have violated their own compliance.
The DFS’ own look into rigging actually dates all the way back to more than four years ago. The then-chief Benjamin Lawsky asked more than 12 banks to release documents that related to their own trading practices. Individual traders are also being tracked and monitored but there is no telling whether this is going to help the situation and whether it is going to try and stop more things like this happening in the future.