A lone FBI agent working undercover for 18 months broke open the dramatic New York case that led to the raids and arrests of a slew of foreign-exchange traders in Manhattan on Tuesday, officials saidyesterday.
The giant sting – dubbed “Operation Wooden Nickel” by law enforcement officials – uncovered everything from laundering money through Switzerland to bribing an undercover FBI agent to draining clients’ accounts of hundreds of thousands of dollars, according to government accounts.
One of the 47 defendants even tried to extort $15,000 from someone, demanding, in a secretly recorded conversation, that the victim be “messed” and left “in a wheelchair,” the feds said.
Yet two more defendants were charged with conspiring to distribute five kilograms of cocaine, according to federal documents.
Another defendant, Albert Santoro, a former prosecutor in the Kings County (N.Y.) District Attorney Office, was alleged to have told an undercover FBI agent that his experience in law enforcement would be useful in “frustrating” attempts to detect illegal money laundering, according to federal documents.
Centering on 20-year-old fraudulent schemes called the “Game” or “Points For Cash,” one source said the case most resembled “gangsterlike” activities seen in movies, rather than financial scandals now rocking Wall Street and the mutual fund industry.
In all, federal officials charged 47 people, some of them employees from New York’s top financial firms, with fraud and other criminal charges, the U.S. Justice Department said.
About 37 people were arrested in New York at a number of trading and financial houses, officials said. Other defendants were being sought in New Jersey, Florida and Colorado, officials said.
“Today’s charges run the gamut of fraud. With more than 1,000 victims, from small investors to large banks, the losses are in the millions,” U.S. Attorney James Comey said in lower Manhattan.
Defendants in the case include employees of J.P. Morgan Chase & Co., Societe Generale, UBS Warburg, Dresdner Kleinwort Benson, Israel Discount Bank, a former member of the Federal Reserve’s private-sector foreign-exchange committee, three practicing attorneys and numerous officers of various publicly traded companies, the department said.
The Fed foreign-exchange committee is an ad-hoc group of financial industry professionals that sets “best practice” policies, but is not formally connected to the Fed.
At the heart of the sting was a lone undercover FBI agent, said Marvin Smilon, a spokesman for the U.S. Attorney’s office in the Southern District of New York.
“It is amazing,” Smilon said of some of the activities that the Serpico-like agent uncovered.
“It (the case) is certainly the largest of its kind” within the foreign-exchange markets, he added.
According to government descriptions of the charges, the undercover FBI agent variously posed as a manager of a hedge fund or as an expert on money laundering for drug traffickers. It was in the latter disguise that the agent tripped up Santoro, according to documents.
The list of alleged illegal activities goes on and on: the routine rigging of trades; offering phony partnerships in a firm; promoting a bogus IPO offering; and shuffling money from clients’ accounts to traders’ or company accounts.
“Some of it is pretty amazing stuff,” Smilon said.
Wire services contributed to this report.
