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Dozens of Currency Traders Arrested in Crackdown

Investors allegedly were cheated by people who may have faked millions of dollars in trades in the unregulated market.

November 19, 2003|From Associated Press

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

Speaking on condition of anonymity, two government sources confirmed that raids were aimed at arresting people named in court papers filed under seal in U.S. District Court in New York.

One source said the allegations were that investors had been cheated by individuals who claimed to be making foreign exchange trades on the investors' behalf, when they were not. The trades were worth millions of dollars, the sources said.

FBI spokesman Joe Valiquette declined to comment, as did Michael Kulstad, a spokesman for U.S. Atty. James B. Comey.

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

The alleged crimes could have been carried out virtually anywhere because of the nature of the foreign exchange market, one of the sources said.

The Wall Street Journal reported on its Web site late Tuesday that FBI agents had arrested seven employees at Madison Deane & Associates in Manhattan and three employees at ICAP in Jersey City, N.J. Executives of the firms declined to comment or were unavailable, the newspaper said.

The Journal and cable network CNBC reported that 47 people were targeted in the probe.

Comey is expected to have a news conference to announce the charges today.

The currency exchange market has no central location, instead operating 24 hours a day as a worldwide network of traders, connected by telephones and computers.

The three main centers of currency trading, the United States, Britain and Japan, handle about 60% 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 as there is in other organized markets.

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