Federal officials raid offices, arrest foreign currency traders

Larry Neumeister

Wednesday, Nov. 19, 2003 | 9:46 a.m.

NEW YORK -- Federal law enforcement officers began arresting several dozen Wall Street traders on Tuesday suspected of foreign currency exchange crimes in a crackdown on a largely unregulated financial market, sources said.

Citing people familiar with the case, The Wall Street Journal reported on its website that traders at more than a dozen firms were to be charged with conspiracy, wire fraud, money laundering and securities fraud.

In one alleged case, employees at J.P. Morgan Chase & Co. and UBS AG were accused of arranging deals in which their firms lost money but customers profited. The workers then accepted money from the customer firms, the newspaper said. Both firms declined to comment, the paper said.

Two government sources confirmed to The Associated Press that the raids were aimed at arresting people named in court papers filed under seal in U.S. District Court in Manhattan.

The sources said the trades were worth millions of dollars. One source said some investors were cheated by individuals who claimed to be making foreign exchange trades when they were not.

FBI spokesman Joe Valiquette declined to comment, as did Michael Kulstad, a spokesman for U.S. Attorney James B. Comey. Comey was expected to have a news conference Wednesday to announce the charges.

At least 10 arrests were made during a raid at a downtown Manhattan office building, although other arrests were expected in other East Coast cities, one source said.

The newspaper reported that FBI agents arrested seven employees at Madison Deane and Associates in Manhattan and three employees at ICAP PLC in Jersey City, N.J. Executives of the firms declined comment or were not available, the newspaper said.

Forty-seven people were targeted in the probe, according to the WSJ and cable network CNBC.

The alleged crimes could be carried out virtually anywhere because the foreign exchange market is a largely unregulated one, one of the sources said.

The currency exchange market has no central headquarters, instead operating 24 hours a day as a worldwide network of traders, connected by telephones and computers. There are three main centers of currency trading -- the United Kingdom, United States and Japan -- which handle about 60 percent of all volume, according to the Federal Reserve Bank of New York.

In 2001, an estimated $1.2 trillion was traded daily, with banks conducting most of the trades. Currency brokers also play a role, acting as intermediaries between banks.

There is no regulatory body establishing trading rules, and no clearinghouse between traders.