U.S. charges two HSBC executives over forex-related scheme

Wed Jul 20, 2016 6:21pm EDT
 
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By Nate Raymond

NEW YORK (Reuters) - A senior HSBC Holdings Plc (HSBA.L: Quote) manager has been arrested and charged alongside a former foreign exchange executive with engaging in a scheme to front-run a $3.5 billion transaction by one of the bank's clients, U.S. prosecutors said on Wednesday.

Mark Johnson, HSBC's global head of foreign exchange cash trading in London, and Stuart Scott, its ex-head of cash trading for Europe, the Middle East and Africa, were charged in a criminal complaint filed in federal court in Brooklyn.

Both men were charged with wire fraud conspiracy, in a case that a person familiar with the matter said was the first against individuals to flow out of a U.S. Justice Department probe of foreign-exchange rigging at global banks.

A lawyer for Johnson declined comment, while an attorney for Scott could not be identified. Robert Sherman, an HSBC spokesman, said the bank is cooperating in the Justice Department's foreign exchange investigation.

Prosecutors said Johnson, 50, and Scott, 43, misused information provided by a client who had hired HSBC to convert $3.5 billion to British pounds in connection with a planned sale of one of the unnamed company's subsidiaries.

The two British citizens then used their insider knowledge to engage in a process called front-running in which they made trades ahead of the December 2011 transaction, resulting in a spike in the price of the currency that was detrimental to HSBC's client, prosecutors said.

"Ohhh, f---ing Christmas," Johnson told Scott in a recorded call the day the transaction went through, the complaint said.

In total, HSBC earned $3 million from trades its FX traders placed and earned $5 million executing the transaction, the complaint said.   Continued...

 
Mark Johnson, (L) HSBC's global head of foreign exchange cash trading in London, exits the Brooklyn federal court in New York July 20, 2016.  REUTERS/Eduardo Munoz