With banks eager to scrub the pervasive FX rigging and manipulation which has been one of the scandals plaguing the banking sector over the past two years, numerous lowly traders had been thrown under the legal bus as the traditional scapegoats meant to deflect attention from company insiders and senior management, many of whom were well aware of the illegal practices taking place. Increasingly more however, refuse to accept this fate. One such person is former JPM FX salesman Patrice Ktorza who claims he was fired to appease regulators after banks were fined $10 billion for conspiring to manipulate currency markets, his lawyer said.
The former executive director is suing the bank for unfair dismissal in a London tribunal. According to Bloomberg, he was “tossed overboard in an attempt to make JPMorgan look clean,” his lawyer, Daphne Romney, said Thursday during questioning of executive Ryan O’Grady. O’Grady said he suspended Ktorza last year for “partially filling” a trade, a practice the bank stopped salespeople from carrying out after a review of its practices in the wake of the scandal. The scandal “reinforced in my mind how big an issue this was,” O’Grady said. “The investigations into the FX business in my mind made it less acceptable that somebody at Ktorza’s level would indeed make what was seemingly a basic error.”
Ktorza, who was paid 290,000 pounds ($419,000), joins a growing list of foreign-exchange traders and salespeople to sue their former employers in recent months, claiming banks were too quick to dismiss workers while attempting to impress regulators. Two former Citigroup Inc. employees, Perry Stimpson and Carly McWilliams, won their cases after a judge found their managers failed to follow proper procedures when dismissing them.
JPMorgan fired back, saying it had recently changed rules so that that only traders, not salesmen, could do “partial fill” trades. Banks “short fill” or “partial fill” an order when they are unable to fulfill the total value of the client’s request at the required rate. JPMorgan salespeople were banned from short filling in an effort to prevent them from taking risks in the wake of the fines, O’Grady said. “Sales staff are not mandated to run risk,” O’Grady said. “This is the exclusive domain of traders on whose trading book risk sits and for which they are ultimately accountable.”
More from Bloomberg:
Ktorza was on his final employment warning when he made the error, according to a witness statement from O’Grady, the co-head of the global fixed income syndication business.
During a disciplinary hearing on May 22 last year, Ktorza said he did not know he wasn’t allowed to partial fill trades, according to O’Grady’s witness statement. Ktorza said he thought JPMorgan’s trading reforms, known as “Project January” were “ambiguous at best” and only related to client confidentiality, according to the statement.
Following the trade in question, a “visceral” confrontation took place between Ktorza and trader Karim Mir, who was attempting to fulfill the rest of the order, according to O’Grady’s witness statement. “Is there a turf war between sales and trading?” the judge asked. “The relationship does have an inherent tension,” O’Grady replied.
No matter the outcome, one thing is certain: JPM, which has already seen nearly $40 billion in legal charges and settlement fees, will continue throwing individual traders under the bus, while keep all upper management spotlessly clean, in order to not only avoid further major legal charges
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