Former Global Head Of HSBC’s Foreign Exchange Cash-Trading Found Guilty Of Orchestrating Multimillion-Dollar Front-Running Scheme
BROOKLYN, N.Y. – Mark Johnson, the former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was found guilty today for his role in a scheme to defraud an HSBC client through a multimillion-dollar scheme commonly referred to as “front running.”
Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC), and Assistant Director-in-Charge Andrew Vale of the FBI’s Washington Field Office made the announcement.
Johnson, a United Kingdom citizen with residences both in the U.K. and the United States, was found guilty after a four-week jury trial of one count of conspiracy to commit wire fraud and eight counts of wire fraud. A sentencing date has not been scheduled. United States District Judge Nicholas G. Garaufis of the Eastern District of New York presided over the trial. Johnson was arrested on a criminal complaint in July 2016 and indicted in August 2016.
“The jury found that former HSBC banker Mark Johnson exploited confidential information provided by a client of the bank to execute trades that were intended to generate millions of dollars in profits for him and the bank at the expense of their client,” said Acting U.S. Attorney Rohde. “This Office, together with its law enforcement partners, will continue to vigorously investigate and prosecute those who would so abuse their client relationships and, more generally, undermine public confidence in the operation of the financial markets by engaging in fraudulent schemes.”
“This verdict makes clear that the defendant corruptly manipulated the foreign exchange market for the benefit of his bank and his bonus pool, to the detriment of the bank’s client,” said Acting Assistant Attorney General Blanco. “This case demonstrates the Criminal Division’s commitment to protecting the financial system from harm, and holding corporate executives, including at the world’s largest and most sophisticated financial institutions, responsible for their crimes.”
“This case involved a complex fraud scheme to ‘front run’ a foreign exchange transaction in order to generate millions of dollars in illicit profits for HSBC, which also indirectly benefited individual traders,” said FDIC Inspector General Lerner. “Such cases are challenging, but important, to bring against bank insiders who misuse their positions and undermine the integrity of a major international financial institution,”
“Mark Johnson misused confidential information to manipulate currency prices and defrauded a client out of more than $7 million,” said FBI Assistant Director-in-Charge Vale. “The American people need to be assured that we are working vigorously to ensure integrity is upheld in financial services industries. We will continue to work with our law enforcement partners to investigate and prosecute those who engage in illegal business practices.”
As established by the evidence presented by the government at trial, HSBC was selected to execute a foreign exchange (FX) transaction related to a planned sale of one of a client’s foreign subsidiaries – which would require converting approximately $3.5 billion in sales proceeds into British Pounds Sterling. HSBC’s agreement with the client required the bank to keep the details of the planned transaction confidential. Instead, Johnson defrauded the client out of millions of dollars by misusing that confidential information.
Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pounds Sterling for their own benefit in their HSBC “proprietary” accounts. Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to “ramp,” or drive up, the price of the Pounds Sterling, benefiting their proprietary positions and HSBC at the expense of their client.
As part of their scheme, Johnson and his co-conspirators made misrepresentations to the client about the transaction that concealed the self-serving nature of their actions. In total, Johnson and the traders he supervised generated HSBC profits of roughly $7.3 million from the execution of the FX transaction for the victim company.
The investigation was conducted by the FDIC’s Office of Inspector General and the FBI’s Washington Field Office. Assistant Chiefs Carol Sipperly and Brian Young and Trial Attorney Blake Goebel of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lauren Elbert of the Eastern District of New York’s Business and Securities Fraud Section are prosecuting the case.
E.D.N.Y. Docket No. 16-CR-457