Former Head of HSBC’s Global Foreign Exchange Cash Trading Sentenced to 24 Months’ Imprisonment for Front-Running Scheme
Mark Johnson Defrauded Client Out of Millions of Dollars by Misusing Confidential Information
Earlier today, in federal court in Brooklyn, Mark Johnson, the former head of global foreign exchange cash trading at HSBC Bank plc, a subsidiary of HSBC Holdings plc (collectively HSBC), was sentenced by United States District Judge Nicholas G. Garaufis to 24 months’ imprisonment for committing wire fraud and wire fraud conspiracy, to be followed by five years’ supervised release. The Court also ordered Johnson to pay a $300,000 fine. Johnson was convicted by a federal jury in October 2017, following a four-week trial, of one count of wire fraud conspiracy and eight counts of wire fraud. The Court remanded Johnson to the custody of the Bureau of Prisons.
Richard P. Donoghue, United States Attorney for the Eastern District of New York, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Inspector General Jay N. Lerner of the Federal Deposit Insurance Corporation (FDIC) and Assistant Director-in-Charge Nancy McNamara, Federal Bureau of Investigation, Washington Field Office (FBI), announced the sentence.
“Mark Johnson exploited confidential information and betrayed a client in order to generate profits for HSBC and enrich himself,” stated United States Attorney Donoghue. “Johnson has been held accountable for his crimes and today’s sentence should serve as a deterrent to fraudsters seeking to cheat their victims by manipulating important benchmarks, such as the FX spot fixings. This Office, together with our law enforcement partners, is committed to bringing to justice those who undermine public confidence in the operation of the financial markets through such schemes.”
“Mark Johnson, an executive at one of the world’s largest financial institutions, cheated his client out of millions and now he’s going to prison for it,” stated Acting Assistant Attorney General Cronan. “This sentencing should serve as a warning to those who engage in crooked financial schemes: The Justice Department’s Criminal Division and our law enforcement partners are watching. We are committed to protecting our financial system from harm and we will hold corporate executives accountable for their crimes.”
“Today’s sentencing holds Mr. Johnson accountable for his egregious conduct to improperly manipulate the foreign currency market, misuse his position, and breach the customers’ trust,” stated FDIC Inspector General Lerner. “We are dedicated to working with our law enforcement partners in order to combat crimes that undermine the integrity of financial institutions and bring culpable bank insiders to justice.”
“Leaders of financial service organizations such as HSBC are held to the utmost standard of integrity, which Mark Johnson failed to uphold,” stated FBI Assistant Director-in-Charge McNamara. “The FBI will not falter in assuring that justice will be brought to those that use company finances for their own personal gain.”
As established at trial, HSBC was selected in 2011 to execute a foreign exchange transaction on behalf of a client, which would require converting approximately $3.5 billion into British Pounds Sterling. HSBC’s agreement with the client required the bank to keep the details of the planned transaction confidential. Instead, Johnson misused that confidential information, defrauding the client.
Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pounds Sterling for HSBC’s benefit in their HSBC “proprietary” accounts. Johnson then caused the $3.5 billion foreign exchange transaction to be executed in a manner 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 profits for HSBC of roughly $7.3 million from the execution of the transaction.
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.
Residence: United Kingdom
E.D.N.Y. Docket No. 16-CR-457