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Category: Banking / Currency / Fraud and Corporate Crime

HSBC currency traders charged with defrauding client

Thursday, 21 Jul 2016 07:23:25 | Sue Lannin

A photo taken on February 28, 2011 of a branch of an HSBC bank in central London. HSBC will slash up to 30,000 jobs worldwide over the next two years as part of a major cost-cutting drive, the global banking giant said on August 1, 2011, as it posted bumper profits. (AFP: Ben Stansall)

US authorities have charged two senior currency traders from global bank, HSBC, with conspiracy to defraud a client by orchestrating a multi-million-dollar "front running" scheme which involved a $US3.5 billion currency transaction.

HSBC's global head of foreign exchange cash trading, Mark Johnson (50), and the bank's former head of currency trading in Europe, Middle East and Africa, Stuart Scott (43), were both arrested.

Both Mr Johnson and Mr Scott are UK citizens.

The pair are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves.

US assistant attorney-general Leslie Caldwell said the case demonstrates US authorities commitment to hold corporate executives to account.

"The defendants allegedly betrayed their client's confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank," Ms Caldwell said.

$US3.5b transaction involved

US authorities, including the FBI, have been involved in the long-running investigation into currency trading at the world's biggest banks.

The US Justice Department said Mr Johnson and Mr Scott are accused of misusing information provided to them by a client who hired HSBC to do a foreign exchange transaction related to a planned sale of one of the client's foreign subsidiaries.

Approximately $US3.5 billion in sales proceeds were to be converted into pound sterling in October 2011.

The pair are accused of allegedly misusing confidential information they received about the client's plans to make a profit.

They are accused of buying pound sterling on multiple occasions for HSBC's proprietary accounts, which they held until the client's transaction was completed.

Bloomberg has reported that the client was Cairn Energy Plc, which was selling its Indian subsidiary to Vedanta Resources Plc.

The charges allege Mr Johnson and Mr Scott ramped up the price of the pound for profit at the expense of their client.

HSBC allegedly made a profit of approximately $US8 million from the transaction.

The bank said it is not commenting on the matter at this stage.

The investigation is being conducted by the US Federal Deposit Insurance Corporation and the FBI.

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