8 High-Profile Financial Scandals in 5 Months

Aug. 17, 2012 — -- intro: Here's an alarming statistic: In the past five months, the financial sector has had eight high-profile scandals.

The most recent: Standard Chartered Bank which settled with New York regulators on Wednesday for $340 million. The charge: allegedly engaging in illegal transactions with Iranian clients.

From worldwide manipulation of interest rates to an admission of fraud written in a suicide note, many of the alleged actions took place years ago but are only now coming to light.

The problems should have gone away when Congress passed financial reforms in 2010. But problems in the industry still exist. Many rules are just taking effect now, but detractors argue that regulation could have done little to prevent several recent cases. Those in favor of more regulation cite the scandals themselves as justification for more financial oversight. In many instances, the new rules helped to expose the wrongdoing in the first place.

Take a look at eight financial scandals that came to light in the past five months.

quicklist:title: J.P. Morgan Chase $7 Billion Trading Mishapmedia: 17023213text:

Date: May 10. J.P. Morgan reports initial $2 billion loss due to a "flawed strategy" in trading.

Story: J.P. Morgan Chase engaged in risky trades (derivatives) that grew from $2 billion to about $7 billion. Traders in the London division attempted to hide the losses. CEO Jamie Dimon personally claimed full responsibility. Investigation into the trading loss is ongoing by several federal agencies. J.P. Morgan Chase lost an estimated $7 billion.

Fallout: There was a Congressional hearing, but no new policy changes. No fines. Chief investment officer Ina Drew resigned her position.

quicklist:title: Libor Rate Rigging Scandalmedia: text:

Date: June 27. Barclays reaches settlement with regulators.

Story: Libor interest rates are the standard used to determine interbank lending. Barclays, a London-based bank, was discovered to have manipulated those rates to profit on select trades. Several U.S. municipalities have sued Barclays as libor rates also have an effect on bond rates. Those municipalities believe that they were cheated out of millions. The world trades an estimated $315 trillion worth of derivatives using libor, according to the New York Times.

Fallout: Treasury Secretary Timothy Geithner is now under scrutiny, accused of knowing about the problem in 2007 when he was president of the New York Federal Reserve. Barclays agreed to settle with U.S. and U.K. regulators for $450 million.

quicklist:title: Standard Chartered Bank Iranian Transactionsmedia: text:

Date: Aug. 15: New York regulators reach settlement.

Story: U.S. sanctions on Iran prevent most banks from doing business there. The sanctions are meant, among other things, to deter Iran from obtaining nuclear weapons. Standard Chartered Bank is a London based bank accused by New York regulators of facilitating illegal transactions. The bank is accused of moving an estimated $250 billion in Iranian money.

Fallout: $340 million in settlement with New York regulators.

quicklist:title: Knight Capital Trading Errormedia: text:

Date: Aug. 1.

Story: High-frequency trading has been blamed for mistakes in the past, but Knight Capital's is one of the largest on record. On Aug. 1, Knight computers accidentally purchased stocks on the New York Stock Exchange, artificially inflating some stock prices. Knight accidentally held onto $7 billion thanks to the error.

Fallout: New rules required that Knight Capital pay for canceled trades, resulting in a $440 million loss for the company. Knight Capital was saved from closing after the investment bank Goldman Sachs extended it a line of credit to help cover the sudden shortfall.

quicklist:title: ING Iranian and Cuban Transactionsmedia: 17023479text:

Date: The Department of Justice disclosed the deal on June 12.

Story: Another bank accused of sidestepping U.S. sanctions. ING is a financial institution based in the Netherlands. The U.S. offshoot of ING, ING Direct, was recently purchased by Capitol One. The bank is accused of moving $2 billion in transferred Iranian money.

Fallout: $619 million forfeited.

quicklist:title: HSBC Helps Launder Money for Cartel and Terror Groupsmedia: 17023734text:

Date: July 17.

Story: Senate investigators say that HSBC funneled Mexican drug cartel money along with money connected to suspected terror groups. A report from released by investigators also says that HSBC executives ignored early warning signs from compliance officers. HSBC is a British bank. The committee estimates there were $7 billion in alleged cartel transfers.

Fallout: The head of compliance for HSBC resigned during a Senate hearing.

quicklist:title: Capital One Fined $210 Million for Deceiving Customersmedia: 17023813text:

Date: July 18.

Story: Capital One told some of its customers that they could receive credit monitoring services for free when in fact they were being charged for the service, according to the Consumer Financial Protection Bureau.

Fallout: The bureau fined Capital One $210 million. It's unclear how much money was lost by customers.

quicklist:title: Peregrine Financial Group CEO Admitted to Fraud in Suicide Notemedia: 17023829text:

Date: CEO charged with fraud on Aug. 13.

Story: Peregrine CEO Russell Wasendorf stands accused of lying to regulators. He admitted to committing fraud in a suicide note. The amount of money in question could come to tens of millions of dollars, according to the federal indictment.

Fallout: Wasendorf made an unsuccessful suicide attempt. Peregrine filed for bankruptcy on July 10.