A senior HSBC banker has been charged him with fraudulently rigging a multibillion-dollar currency exchange deal after he was arrested by the FBI as he attempted to board a transatlantic flight.
Allegations to have “corruptly manipulated the foreign exchange market to benefit themselves and their bank” and of “defrauding clients” have been leveled against Mark Johnson, a British citizen and HSBC’s global head of foreign exchange trading, and a colleague.
Shortly before he was due to fly to London from New York’s JFK airport, the bank executive was arrested. He was also due to be formally charged by a judge at Brooklyn federal court later on Wednesday. He was later released on bail.
A warrant was issued for a second Briton, Stuart Scott, who was HSBC’s European head of foreign exchange trading in London until December 2014,. He has been accused of the same crimes.
The US government has been a investigation into bankers’ alleged rigging of the $5.3 trillion per day forex market and these are the first people to be charged in connection with that investigation.
“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank. This case demonstrates the [US Department of Justice’s] criminal division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes,” said the US assistant attorney general Leslie Caldwell.
Both the arrested executives had “placed personal profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars”.
Scott, 43, lives in London while Johnson, 50, lives in both London and New York.
According to the complaint, by fraudulently trading currencies in advance of a client buying $3.4bn of pounds sterling in 2011, the men allegedly made $3m profit.
“At the expense of their client” and in a manner “designed to spike the price” to the benefit of HSBC, the accused were engaged in buying sterling in advance of the client’s transaction. $5m in fees for their work were also billed by them to be paid by the clients.
When the client questioned them about the higher price they were forced to pay to bring back proceeds from an overseas transaction to the UK, Johnson and Scott are accused of weaving a “web of lies” to the clients.
“When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades. The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves,” said the US attorney Robert Capers.
“These individuals are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves. The FBI will continue to work aggressively with our partners to prevent, investigate and prosecute criminal fraud in the financial markets,”said Paul Abbate, the FBI’s top official in Washington.
“HSBC has been and continues to cooperate with the DOJ’s FX investigation,” Rob Sherman, a spokesman for HSBC said.
(Adapted from The Guardian)