A U.S. watchdog is investigating whether traders at two banks, including an unnamed Canadian institution, have been manipulating trading around Fannie Mae and Freddie Mac, reports Reuters, citing an FBI intelligence bulletin.
The FBI says traders have been using “unsophisticated tradecraft” like hand signals and telephone ring tones to alert each other to large orders from the two mortgage firms. The bureau alleges the traders have been front-running the firms in the interest rate swaps market, Reuters reports.
The tip off came from a past high-level worker at a U.S. bank, and another employee at a Canadian bank. The report does not name the banks or employees involved. The investigation also interviewed other employees over 2012 and 2013.
The FBI alleges the banks may have made as much as $100 million from the scheme.
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