A former head of Credit Suisse Group AG’s foreign-exchange business told jurors he “didn’t love it” when his traders participated in chat rooms with other banks, because of the inherent risk of communicating with competitors.

“But I realized it was valuable.”

Steve Yanez testified Friday in a class-action trial of a lawsuit by investors who allege the bank used online chat rooms to fix the bid-ask spreads for currency trades with other big banks, resulting in greater profits. While the chats posed some risk, they were a useful tool for market transparency, gauging liquidity and gathering market “color,” Yanez said.

“We didn’t say they could not talk about spreads,” said Yanez, who was head of FX from 2008 to 2011. “As long as it was generic and not specific to a client.”

Credit Suisse is the last of 16 banks to face a class-action suit that accuses it of rigging the foreign-exchange market from late 2007 through 2013 in violation of US antitrust law.

Jurors have been shown numerous chat room transcripts that at times included what US District Judge Lorna Schofield characterized as “colorful language, course, insensitive or demeaning language.” The judge warned jurors not to let that sway their consideration of the case.

Yanez testified as a witness for Credit Suisse, frequently excusing particular chat-room comments as innocent attempts to understand the state of the market on a particular day or, in one instance, “market bluster from a kid.”

Yanez said conspiring to widen spreads was the opposite of what Credit Suisse was trying to do at the time, which was to increase its market share in foreign-exchange trading.

“If you show a wider spread, you don’t get executed on,” Yanez told jurors. “Somebody else gets the trade.”

By the end of 2017, the other banks, including Citigroup Inc., UBS Group AG, Barclays Plc, JPMorgan Chase & Co., HSBC Holdings Plc and Deutsche Bank AG, had agreed to pay a total of $2.3 billion, one of the biggest antitrust settlements in history. Despite participating in settlement talks, Credit Suisse wasn’t able to reach an agreement.

Jurors in the trial, which began Tuesday, will determine whether there was an industry conspiracy to fix prices and, if so, whether Credit Suisse took part in it. Alone at the defense table, Credit Suisse is left to defend the rest of the foreign exchange industry in addition to itself.

If jurors find Credit Suisse conspired to fix prices, customers can pursue damages later in individual proceedings.

Jurors Friday watched video testimony from former Credit Suisse trader Natalie Williams, who said that some of the online comments were meant to be “ironic,” including the name of one of the chat rooms she participated in: “Yen Cartel.”

In one conversation, participants were discussing the spread in yen currency pairs, which one trader characterized as “too tight.”

“Unless we all decide to make it wider,” another responded. “We have the power.”

‘A Joke’

Williams said the comment, in a group with traders from “four or five banks with very little market share, very little business,” was not meant seriously.

“I think we were just making a joke,” she said.

In opening statements, an attorney for the plaintiffs said the bank was part of a “conspiracy network.” Credit Suisse’s lawyer said that “smaller isolated things” were being used to unfairly allege a larger conspiracy.

The bank at one point faced potential liability of $19 billion, based off the tripling of damages that is standard in price-fixing cases, according to Bloomberg Intelligence. The lawsuit follows investigations from more than a decade ago into price-fixing in the currency market that have resulted in numerous settlements and prosecutions. Witnesses often had difficulty remembering specific online conversations from the time.

The plaintiffs claim Credit Suisse traders were involved in chat rooms discussing the US dollar, euro, British pound, Australian dollar, Swiss franc, Czech koruna, Israeli shekel, Polish zloty, and South African rand.

The case is In Re Foreign Exchange Benchmark Rates Antitrust Litigation, 13-cv-7789, US District Court, Southern District of New York (Manhattan).

Source:
courtesy of BLOOMBERG

by Bob Van Voris

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