Senior HSBC Manager Caught in the US Fraud Dragnet

A top executive of HSBC has been charged with forex fraud by authorities in the United States. HSBC’s global head of foreign exchange trading, Mark Johnson, was arrested on the basis of charges brought against him by the US Department of Justice (DoJ). Stuart Scott, a former colleague of his, has also been charged with fraud. The two high profile money-market traders are believed to have used inside information on a large currency deal to make profits of their own. The deal in question is understood to have taken place in 2011.

The fraud in question is one of front-running, in which traders make use of confidential information on future deals to conduct their own trades. The two men were handling an order on behalf of a client who wished to buy $3.5 billion worth of GB Pounds. They purchased pounds sterling with their own money prior to handling the order because the value of the currency was certain to rise. Furthermore, they timed the deal to get the maximum benefit from it. While they did make a lot of money for the bank thanks to this deal, approximately $8 million from this client alone, they are believed to have enriched themselves substantially, all the while hiding their activities from the client.

Johnson is accused of purchasing pounds for euros and for dollars sometime in November and December of 2011 respectively. Scott, on the other hand, is alleged to have bought pounds for euros. Both the men then sold their holdings of pound sterling to HSBC on the same day as the client made the big foreign exchange purchase, netting handsome profits in the process. Furthermore, they also advised the client to conduct the transaction at a specific time of the day when they would be able to get the most profits by manipulating prices.

HSBC said that it was providing the Department of Justice’s investigation will all necessary cooperation. However, it declined to comment on any aspects of the active litigation or about the actions of individual employees.

While Scott has denied all the allegations of wrong doing against him, it has been hard for Johnson to evade the charges. He was, however, released on bail of $1 million after a court hearing.

DoJ to Hold Corporate Executives Accountable

The US Attorney Robert Capers released a statement saying that the government would pursue corporate executives who used their inside knowledge to make money for themselves fraudulently. The authorities have collected a wealth of evidence including emails and chats on Bloomberg in which the two men waited to complete the transaction at a time when the dollar to pound exchange rate was at its highest.

The client is believed to have lost money because of how the deal was conducted. The DoJ has been conducting a number of investigations into fraudulent practices in the money markets and it has been able to control the rigging in the markets to some extent. The arrest of senior executives will certainly serve as a warning to others.

About HSBC Bank

One of the largest banking and financial services organisations across the globe, HSBC has been in the centre of many controversies in the recent past.  From closing their Muslim customers’s accounts in 2014, getting linked in the arms trade, cultural insensitivity in their advertisements, data loss to withdrawal from graduate overdrafts – they have been there and seen a lot!

In spite of being one of Britain’s big five banks and being seen as a less risky proposition than the other banks by customers and investors alike, such controversies really rattle the bank’s trust and popularity!