Antitrust Law Daily Sherman Act charges against foreign traders for manipulation of FX spot market can go forward
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Monday, May 7, 2018

Sherman Act charges against foreign traders for manipulation of FX spot market can go forward

By Nicole D. Prysby, J.D.

Because the allegations against three foreign traders involved price fixing affecting U.S. commerce, the claims against the traders were covered under the Sherman Act, held the federal district court in New York City. The traders were accused of manipulating the U.S. dollar-euro currency pair and argued that the conduct was not subject to the Sherman Act because it involved purely foreign transactions conducted by foreigners in foreign commerce. The court found that although the alleged conduct did not occur in the U.S., it substantially affected interstate and foreign commerce in the U.S. because the transactions involved the sale of U.S. dollars and euros to and from individuals in the U.S. The court also rejected a challenge to the indictment on due process grounds, holding that even if the traders did not know that their alleged actions could be prosecuted in the U.S. under the Sherman Act, they knew that price fixing was unlawful and they could be subject to criminal prosecution somewhere. The court also found that international comity did not preclude the exercise of jurisdiction over them in a U.S. court, finding that there was no conflict between U.S. and U.K. law, there was a substantial relevance to the U.S., and prosecution would not harm U.S.-U.K. relations (U.S. v. Usher, May 4, 2018, Berman, R.).

In July 2017, three former traders from the United Kingdom who worked for major banks were indicted in the U.S. under the Sherman Act for conspiracy to manipulate the price of U.S. dollars and euros in the foreign currency exchange spot market. The three U.K. nationals were alleged to have fixed prices for the U.S. dollar-euro currency pair between 2007 and 2013, by refraining from trading against each other’s interests and by coordinating bidding on EUR/USD benchmarks to fix prices. The traders moved to dismiss the indictment, arguing that the conduct did not fall under the Sherman Act, that the indictment violates the Due Process Clause, and that the court should decline to exercise jurisdiction on international comity grounds.

Sherman Act. The court first found that the indictment set forth a per se violation of the Sherman Act, because it entailed an agreement between competitors to manipulate a price. Although the traders argued that there was no horizontal restraint of trade because they were not always buyers or always sellers in the FX spot market, the court rejected that argument because they were in the same level in the market; i.e., they were all traders working for dealers in the FX spot market.

The court also rejected the traders’ claim that their conduct fell outside the Sherman Act because the indictment alleged only foreign transaction conducted by foreigners in foreign commerce. The traders’ alleged conduct involved price fixing and bid rigging involving U.S. commerce. The indictment stated that the traders received orders from customers in the U.S. and fulfilled the orders through money traded at manipulated prices. The transactions involved transfers from various U.S. parties to other U.S. parties. Therefore, they substantially affected interstate and foreign trade and commerce. The court also found that the foreign conduct was import trade that had a substantial and intended effect in the U.S., because U.S. dollars and euros were the goods whose prices were allegedly fixed and were imported into the U.S. The traders’ alleged conduct led to U.S.-based parties paying more or receiving less because of the collusion to manipulate the EUR/USD prices. The court also held that even though the conduct occurred outside the U.S., it was covered by the Sherman Act because it had a substantial and intended effect in the U.S.

Due process. The traders argued that the prosecution violated their due process rights because their conduct did not have a sufficient nexus to the U.S. and they did not have notice that their conduct was criminal, because the indictment was based on an unprecedented theory of criminal Sherman Act liability. The court found that a sufficient nexus existed between the traders’ conduct and the U.S. because of the effects of the conduct in the U.S.; the indictment alleged that the traders’ actions affected significant U.S. interests. The court also found that the traders had fair warning that their conduct was criminal. They were investigated for the same conduct in the U.K. and it is widely understood that price fixing is unlawful conduct. It was not required that the traders understood that the conduct could cause them to be subject to criminal prosecution in the U.S., only that they knew that they could be subject to criminal prosecution somewhere.

International comity. Finally, the traders argued that the principle of international comity should preclude the exercise of criminal jurisdiction over foreign defendants who engaged in entirely foreign conduct. The court discussed the appropriate factors and found that nearly all favored exercising jurisdiction. There is no conflict between U.S. and U.K. law, and although the U.K. declined to prosecute, it stated that its decision did not impact any decision by any other domestic or foreign agency. The conduct was of greater relevance to the U.S. and affected U.S. commerce, and was not precluded by a treaty and would not threaten U.S.-U.K. relations.

The case is No. 1:17-cr-00019-RMB.

Attorneys: Carrie Ann Syme, U.S. Department of Justice, for the United States. Andrew E. Tomback (White & Case LLP) for Richard Usher.

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