HSBC Executives Charged By U.S Authorities In Forex Rigging Case

In a first, a senior executive from global banking major HSBC Ltd has been charged by U.S. authorities for allegedly front-running a forex scheme to the tune of $3.5 billion financial transactions which were carried out in 2011. The authorities have also pressed similar charges against a former HSBC executive in the same case.

The two accused executives are Mark Johnson, HSBC’s global head of foreign exchange cash trading and Stuart Scott, the former head of cash trading for Europe, the Middle East and Africa.

They have been charged with criminal complaints of wire fraud conspiracy in a federal court in Brooklyn. This is the first case where charges have been filed as a result of a probe led by the U.S. Justice Department regarding cases of forex rigging in global banks.

A spokesperson for HSBC, Robert Sherman said that the bank was cooperating with the authorities working on the case. According to investigators, Johnson and Scott misused information shared by a client who had hired HSBC to handle the conversion of $3.5 billion into British pounds with regards to a sale of a subsidiary of the company represented by the client.

The two executives leveraged this information to carry out a series of trades before the scheduled transaction took place, which resulted in a spike in the currency rate resulting in losses for the client. The bank netted $3 million from these trades in addition to earning $5 million for carrying out the transaction.

In a statement, Assistant Attorney General Leslie Caldwell said,

The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank.

Caldwell also went on to state that the case established the ability of the authorities to hold corporate executives of the largest of financial institutions responsible for crimes committed by them.

Johnson was detained in a surprise arrest at John F. Kennedy International Airport earlier this week and later released on bail of $1 million. Frank Wohl, Johnson’s lawyer informed the court that Johnson was in the process of shifting to the United States with his family after a transfer.

The arrest came after a year-long investigation by the Justice Department which has resulted in four banks pleading guilty to charges of manipulating currency prices. HSBC is however not one of the four banks which have admitted guilt.

This is the first successful investigation related to misconduct in forex transactions. A few days earlier the Federal Reserve Board had announced that it was banning Matthew Gardiner, former trader at Barclays Plc and UBS AG from working in the banking industry for manipulating forex transactions.

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