US authorities have arrested HSBC’s global head of foreign exchange cash trading, Mark Johnson, and charged him with fraudulently trading ahead of a client’s transaction.
Johnson, who is based in London, was charged alongside Stuart Scott, a former HSBC forex executive, on suspicion that they engaged in a scheme to front-run a US$3.5 billion transaction by one of the bank’s clients, according to Reuters.
The two men were charged with wire fraud conspiracy, under a criminal complaint filed in a federal court in New York.
The move came in the wake of an investigation by the US Justice Department into foreign-exchange rigging at global banks.
HSBC said it cooperating in the US probe.
Prosecutors said Johnson and Scott misused information provided by a client who had hired HSBC to convert US$3.5 billion to British pounds in connection with a planned sale of one of the unnamed company’s subsidiaries.
The two men 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.
In total, HSBC earned US$3 million from trades its forex traders placed and earned US$5 million executing the transaction, the complaint said.
“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” US Assistant Attorney General Leslie Caldwell said in a statement.
Johnson was arrested at John F. Kennedy International Airport on Tuesday night and was released on Wednesday on a US$1 million bond following a court hearing, the report said.
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