A federal judge urged U.S. authorities to pursue prosecutions against individuals as part of their investigation into the manipulation of currency markets as he accepted penalties against four of the world’s largest banks.

In handing down the penalties at a sentencing hearing in Bridgeport, Connecticut, on Jan. 5, U.S. District Judge Stefan R. Underhill adopted a recommendation from the government and ordered the banks to pay a combined $2.5 billion, less than the amount called for by federal sentencing guidelines. He said that “when the market is rigged, folks who play by the rules are suckers.”

“Mischief will be best deterred if the people responsible are not only fired but that any compensation made to them that was triggered by the wrongful conduct, for example bonuses, are clawed back or disgorged,” Underhill said.

“Frankly, I would encourage the government to consider prosecution of individuals,” the judge said.

The banks—Citigroup Inc., Barclays Plc, JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc—pleaded guilty in May 2015 to rigging currency rates. As part of an overall $5.8 billion settlement with multiple regulators, they agreed to pay the roughly $2.5 billion to the Justice Department.

Citigroup will pay $925 million, Barclays $650 million, JPMorgan $550 million and RBS $395 million.

Separately, UBS Group AG will pay $203 million. UBS had received immunity from prosecution in the currency case because of its cooperation with authorities. But the bank’s misdeeds in that case were found by prosecutors to have breached an earlier agreement over its role in manipulating benchmark interest rates.

Guilty Plea.

The banks’ sentencing came a day after a former currency trader, Jason Katz, pleaded guilty to conspiring to fix prices in the market. Katz, who worked at several firms including Barclays, was the first individual to admit guilt in the probe. He’s agreed to cooperate as part of his plea.

The sentencing of the banks “really signals to individuals and banks that there are penalties and consequences for manipulating markets,” said Mayra Rodriguez Valladares, a former foreign-exchange analyst for the Federal Reserve Bank of New York who conducts training for banks and financial regulators as managing principal of MRV Associates in New York.

Spokesmen for Barclays, UBS and RBS declined to comment.

“We’re pleased to conclude the final step of this resolution,” said Brian Machiony, a JPMorgan spokesman.

“Not only has Citi accepted responsibility, it has also made every effort to cooperate with the investigations conducted by the Department of Justice and other authorities,” Citigroup said in a statement filed as part of the court proceedings. “Citi has engaged in significant remediation efforts, both before and after the guilty plea, which have been overseen at the most senior levels of Citi. These efforts demonstrate Citi’s serious commitment to the prevention of future misconduct.”

Banks or affiliates that have pleaded guilty to currency or interest-rate manipulation are required to receive waivers from the Department of Labor before their sentencing in order to continue managing U.S. pension assets without interruption. The Labor Department granted one-year waivers to JPMorgan, Citigroup, Deutsche Bank, Barclays and UBS two weeks ago, paving the way for their sentencing.

Banks’ Cooperation.

The government revealed in court papers filed ahead of the Thursday sentencing that Barclays, Citigroup and JPMorgan Chase had cooperated to provide evidence of a potential new antitrust conspiracy in the currency spot market.

The disclosure shows that the Justice Department isn’t finished probing global financial markets for collusion after years of investigating currency trading and interest-rate benchmarks that have resulted in more than $4 billion in criminal penalties.

While the filings don’t provide details of the new investigation, Bloomberg reported in January 2016 that prosecutors were looking into whether banks conspired to fix prices quoted to clients for buying and selling currencies, known as a bid-ask spread.

The sentencing documents contain little information as to whether the cooperation is helping prosecutors build cases against the small group at the heart of the conspiracy—traders at the five banks that prosecutors say used an instant-messaging group called The Cartel to fix prices. Barclays, Citigroup, and JPMorgan provided audio files, documents and trading data in connection with the new probe, while Barclays also got information from witnesses, the government said in the filings. Prosecutors didn’t say whether RBS or UBS were also involved.

Probation Period.

Upon sentencing, the banks begin three-year probation periods requiring them to report any potential misconduct or investigations by authorities.

Christopher Nedeau, a former California state prosecutor who is representing several alleged victims of the banks’ scheme in a proposed class-action suit in Manhattan, appeared in court on Thursday to seek an amendment to the plea agreements that would pave the way for restitution to be paid. The judge denied the request, saying that the issue should be taken up by the judge considering the lawsuit.

Nedeau said he feared that lawyers for the banks, after admitting to the scheme as part of the plea deal, would “talk out of both sides of their mouths” by later implicitly denying the same allegations in an effort to have his case thrown out. The attorney also criticized prosecutors for failing to secure money for victims under the deal, and took issue with Underhill’s suggestion in court that calculating victims’ losses at this point in the litigation would delay the process.

“Their computers can tell you to the penny what they overcharged,” Nedeau, who is based in San Francisco, said outside court. “The government is dodging responsibility to the victims of this crime. It’s more worried about bringing billions of dollars into the government’s coffers.”

Tom Carson, a spokesman for the U.S. attorney’s office in Connecticut, didn’t immediately return a phone call seeking comment.

— With assistance from David McLaughlin, Lananh Nguyen, Jenny Surane and Neil Weinberg

To contact the reporters on this story: Erik Larson in New York at elarson4@bloomberg.net; Tom Schoenberg in Washington at tschoenberg@bloomberg.net; Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: David Glovin at dglovin@bloomberg.net

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