Gardiner: FX Cartel had ‘gentlemen’s agreement’  

Matthew Gardiner, a co-operating witness for the government, says the group co-ordinated trades for profit

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Gentlemen’s agreement: Gardiner says that what he did for the Cartel, he would not do for a competitor

Matthew Gardiner, an alleged co-conspirator in the foreign exchange Cartel on trial in New York, said they had a “gentlemen’s agreement” not to trade in a way that was detrimental to one another.

Gardiner is testifying under a non-prosecution agreement as a key witness for the government in its criminal case against alleged Cartel members Christopher Ashton, formerly of Barclays, Rohan Ramchandani, formerly of Citi, and Richard Usher, who was employed at RBS and JP Morgan. They are accused of manipulating prices in the EUR/USD spot market and have pleaded not guilty.

On October 12, Gardiner told jurors he believed an agreement existed because the group sometimes co-ordinated some of their trading in order to make a profit.

Describing a 2007 Bloomberg chat between himself and Usher, Gardiner said: “I was agreeing that I wasn’t going to trade in a fashion to hurt or move the market in a way that would [hurt a trader]… It’s a gentlemen’s agreement. Trying to help each other out. When I share information, I wouldn’t want them using it against me.”

The two met in September 2007, through a broker who had invited them out for drinks. Gardiner said he was interested in extending his contact list with other euro traders, as well as getting market information and rumours.

When he met Usher, Gardiner was initially surprised: “His reputation precedes him. He was down to earth.”

From the next day, the two men began chatting with each other on a daily basis. Usher then allegedly did something, which, again, surprised Gardiner – he revealed his open risk position.

I’ve never spoken to another trader at another bank that told me information to my own advantage to make money out of it to their disadvantage
Matthew Gardiner

“He told me in short form he just traded with a customer; not the customer ID, but information that [made me realise] he hadn’t bought back his full position,” Gardiner said. “I’ve never spoken to another trader at another bank that told me information to my own advantage to make money out of it to their disadvantage.”

By the time their chats were in full swing, Gardiner said that if he had taken advantage of the information shared with him, he had not expected the mutually beneficial agreement between them lasting very long.

“This is a trust test, mate,” Usher told him on the morning of December 12, 2007, in a Bloomberg chatroom. “Please take seriously when I say me n u… this will get hit hard in 10 mins, I believe.”

Gardiner responded: “Noted.”

“If that gets out I’m in trouble,” Usher replied.

‘Naughty boyz club’

The value in such information, said Gardiner, was being able to anticipate future price movements. He said Usher was one of the few active EUR/USD traders, and his information was frequent and relevant to trading the single currency.

“Given you are doing the same job… it sort of begets a very close relationship,” said Gardiner. “We trusted each other pretty quickly.”

At the time, Gardiner did not think about whether the two were acting as competitors. Looking back five years later, “perhaps not”, he told the court.

That same month, Gardiner asked Ramchandani, whom he styled as ‘lil sherman’, to join the chat because he felt it would be easier and more beneficial if they were all in it.

“Aha!! The naughty boyz club,” Ramchandani said upon entry.

Gardiner did not invite Ashton into the group until 2011. At the time, Ashton had replaced him as the euro trader at Barclays. Gardiner had accepted a job at UBS in Switzerland. They all spoke every day, except for holidays and sick days, Gardiner said.

They became so close that they were there for each other whenever one was in a pickle, chat transcripts shown in court suggest. The defence has argued the government has cherry-picked its information and promises to provide jurors the full scope.

A chat from August 3, 2009 revealed:

Usher: how u doing rug (the nickname for Ramchandani).

Ramchandani: Not gr8.

Ramchandani: Sitting on bid.

Usher: U call foss (Gardiner’s nickname).

Gardiner: Yup.

Gardiner: He’s gone quiet, he’s I reckon he’s 200 & something short.

Gardiner joked that he wanted to “rip it”. They did not agree with Ramchandani’s strategy for resolving his short position, and if Gardiner had let it rip, his friend at Citi would have suffered a loss.

“Shall we rip it bury him,” Usher joked backed.

Gardiner’s trading data, which was revealed in court, shows he helped out his friend by trading millions of euros in a way that was beneficial to Ramchandani.

Avoiding compliance

At times, the men sought to avoid compliance by using code words, Gardiner said. “Coin toss” or anything revolving around coins meant the People’s Bank of China was about to enter the market. The central bank dealt large amounts in a short period of time and that sometimes moved the market very quickly. It was a sign of imminent danger, he added.

The Central bank of Korea was “Nemesis” or “Nem” and any musical reference was meant for the Dutch pension fund, APG, Gardiner said.

“We knew you couldn’t just say a client’s name to another bank. Trades or customer deals were confidential. It shouldn’t be shared with other banks,” Gardiner admitted.

If a customer had suspicions their order was leaked and complained to either of the banks, code words would ensure compliance found nothing.

Then there were squabbles, such as the alleged violation of the so-called rules of the group in June 2008.

Gardiner: Get 100?


Usher: Passed lower so smashed it.

Gardiner: Rich slammed it as got given 105.

Gardiner: Hope you choke on ‘em.

Gardiner was not happy. The price had moved on him and he believed Usher was partly to blame. He told Usher: “Just for the record rich… if the situ reversed you’d have done every single eur I sold in your face when got that 100… learned something today… I’m f-king steaming.”

Usher told Gardiner: “Mate, I went 70–73 on the toy in 100… I know you’re hurting right now. But seriously if I had any and I mean any shorts left you would have done them… and you have my word that is the truth. Think we’ve done enough for each other in the past to know how we both work.”

Usher, feeling “awful” about the accident, said he would leave the chat “cos that’s simply not me”.

Gardiner and Usher reconciled the friendship that same day over instant chat, with Gardiner telling Usher he should have known better than to entertain the thought for a second that Usher would trade to his disadvantage: “You were short what you’d clumped out above 70… not your fault I lost…”

Usher promised: “I will always try and help ya… sorry you got smoked.”

“Didn’t want to hide”

By 2013, when Gardiner had moved to Standard Chartered in London, there were regulatory concerns about trading around the benchmark fixes, and there were whispers and press reports of a US investigation. Gardiner discovered that he and the other Cartel traders were the suspects at the centre of it.

Gardiner reported the matter to StanChart’s compliance department. Days afterwards, he was suspended. He soon got a lawyer in the US, contacted his old employers at UBS and Barclays, and later the US Department of Justice. Gardiner wanted to see if the rumours were true, whether the DoJ had any interest in his co-operation, and whether UBS would indemnify his legal fees.

The rumours were true. There was interest in hearing from him. UBS is still reimbursing Gardiner’s legal fees to this day.

Gardiner, who is expected to face cross-examination on October 15, told jurors how he reached out to the authorities: “I didn’t want to hide. I just want to explain my conduct. I wanted to explain myself and tell the truth… In general, we had an agreement to help each other out.”

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