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Deal Judge: The Dumbness of Forex, Scalia, and Hizzoner

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Ed. note: This is a new weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.

Issue #1: The $4.3 billion chat room.

The big news this week is that six firms will pay $4.3 billion to a suite of international regulators in the first set of punishments from rigging the foreign exchange market. Of course, it's not at all clear that what Forex fixers did was that big of a deal. The Financial Conduct Authority in the U.K. says that "[t]he traders put their own interest ahead of their customers, they manipulated the market -- or attempted to manipulate the market -- and abused the trust of the public." That's lawyer-speak for "that's not fair." The fines amount to a $4.3 billion "unsportsmanlike conduct" penalty.

That would be fine if this was the end of it, but this is not the end of it. Benjamin Lawsky, Superintendent of the New York State Department of Financial Services, refused to sign onto the FCA settlement, allegedly believing that it's "too weak." So, expect to see Lawsky's name coming to a ballot near you in the future. And it's not clear how the customers -- whose interests were allegedly sublimated in chat rooms across the financial world -- will actually get their cut of the $4.3 billion. Other regulators, including the U.S. Justice Department, are still investigating.

In the life cycle of this pile-on, we're at the point where Merry and Pippen demand to be included without knowing where they're going.

Issue #2: Antonin Scalia would really like to fix some legislation from the bench.

Did you catch the Supreme Court justice openly campaigning for an opportunity to change insider trading laws? Here, let me highlight the bit from Scalia's decision to not hear the appeal of Doug Whitman:

“A court owes no deference to the prosecution’s interpretation of a criminal law,” wrote Justice Scalia, while raising the related question: “Does a court owe deference to an executive agency’s interpretation of a law that contemplates both criminal and administrative enforcement?”

In case you misplaced your Captain Crunch decoder ring, Scalia was even more clear:

Whitman’s appeal didn’t directly concern the issue of deference, Justice Scalia wrote, “so I agree with the Court that we should deny the petition. But when a petition properly presenting the question comes before us, I will be receptive to granting it.”

Good to know, Nino. If somebody asks you exactly the right question, you are "receptive" to completely ignoring the government's interpretation of insider trading law. A few points, in no particular order:

  • Somebody needs to remind Antonin Scalia that NOBODY ELECTED HIM.
  • I like how Scalia has dropped even the mere appearance of impartiality before hearing a case.
  • In the meantime, Scalia is comfortable with Whitman sitting in jail because his lawyers didn't ask the right questions.

The last point bothers me the most. This isn't a game. If Scalia honestly thinks Whitman deserves to be free, denying his appeal with this cheeky "but you didn't ask the right question" rhetoric is freaking sadistic.

Issue #3. Billionaires ignore laws they don't like.

From the New York Post:

Mike Bloomberg isn’t stepping down from the soapbox.

The Dodd-Frank regulations put in place after the financial crisis are “stupid laws” that the banking industry will just ignore anyway — just like Mayor Bill de Blasio’s new 25-mile-per-hour speed limit, the financial data company CEO and former New York City mayor said on Monday.

“The world adjusts to stupid laws,” he said at an industry conference. “They just don’t pay attention to it and you get burned later on. That really is what happens, like a 25-mile-an-hour speed limit.”

Oh, I can ignore laws I think are stupid? That's how it works, Mike? Great! Next time I'm stuck in midtown traffic, I'm going to tell my driver to just DISREGARD the people in the stupid bike lanes and get my ass to Grand Central. Glad we agree. Also, it's freezing outside, do you mind if I light my cigarette up in here while I wait for my drink?



BlackRock And PIMCO Want A Slice Of That Sweet, Sweet Forex Settlement Action

Larry Fink is tired of watching all these regulators and pension funds hogging all the spoils.