Former UBS FX ‘Cartel’ trader escaping criminal trial by turning in his colleagues to prosecutors

Matthew Gardiner, otherwise known as ‘Fossil’, was one of the ringleaders of the infamous ‘The Cartel’ chat room. Today he has been banned for life from the banking industry, however he has escaped criminal prosecution because he is turning his colleagues in to prosecutors.


When does professional loyalty end?

In the case of former UBS FX trader Matthew Gardiner, it is clear that loyalty to colleagues ends when saving his own skin becomes an option.

Mr Gardiner is the latest subject of censuring by US authorities, yesterday having been handed a permanent ban from the baking industry by the US Federal Reserve, however this only signals the end of his professional career, and despite his involvement in the widespread practice of FX rate manipulation that traders within some of the world’s largest interbank FX dealers conducted, he may escape criminal prosecution due to his agreement to effectively shop his colleagues to law enforcers.

Mr. Gardiner was put on leave from his position at Standard Chartered in 2013, and officially resigned from his role as an FX trader in March 2014.

Prior to joining Standard Chartered, Mr. Gardiner was a trader at UBS before moving to Standard Chartered in September 2013.

At the center of the investigation into FX market manipulation by bank traders, which was conducted by US, British and Swiss authorities were transcripts of electronic chatrooms within which senior currency traders at major interbank FX dealers discussed with their competitors at other banks the types and volumes of the trades that they planned to place.

The discussions in the chatrooms were interspersed with jokes about manipulating the FX market and repeated references to alcohol, drugs, and women.

The investigation by regulators particularly focused on one small exclusive chatroom which was variously called The Cartel or The Mafia, of which Mr. Gardiner was a key member alongside former RBS trader Richard Usher who moved to JPMorgan as Head of Spot FX in 2010, Rohan Ramchandani, Citigroup’s Head of European spot FX Trading and Chris Ashton, Head of Voice Spot FX Trading at Barclays.

On this basis, Mr. Gardiner has a huge amount of inside knowledge with regard to how ‘The Cartel’ operated and was a very influential member who went under the chat room name of ‘Fossil.’

Today, officials in the United States have confirmed that they are confident that they will be able to charge individual traders with manipulation of currency markets as a result of information provided by Mr. Gardiner, whose pseudonym ‘Fossil’ had come about due to his seniority in age over other traders in ‘The Cartel’.

A cooperator like Gardiner could bolster the U.S. case by helping prosecutors understand the market and actions by traders, and later explaining it all to a jury. Prosecutors have said traders in the chatroom used coded lingo to share information about client orders and coordinated euro-dollar trades in an effort to increase their profits.

Whether Mr Gardiner has agreed to cooperate in exchange for lenient treatment has not been confirmed, however considering the extremely harsh criminal prosecutions and sentences received by other ringleaders in the manipulation saga, it appears that Mr. Gardiner, who has been cooperating with the Justice Department for several months, has thus far only received a civil censuring in the respect that the Federal Reserve has struck him off. He has not been subject to any criminal prosecution.

The practice of engaging in illegal trading activity and then turning on colleagues when it gets hot in return for lenient treatment is not unheard of.

One of the most famous instances of this is former penny stock trader Jordan Belfort, otherwise known as “The Wolf of Wall Street” who served just 22 months in jail when he could well have received a life sentence, because he agreed to turn in colleagues who were involved in bilking their customers, operating a boiler room and engaging in money laundering.

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