Former HSBC Trader Denies Forex Rigging Charges in Brooklyn Court

Mark Johnson, former head of global of foreign exchange cash trading at HSBC, has entered a not guilty plea in Brooklyn federal court yesterday. Johnson was charged with wire fraud and conspiracy by the U.S. Justice Department for his alleged involvement in a $3.5 billion front-running Forex scheme.

Johnson’s prosecution is part of the ongoing Justice Department probe of foreign exchange rigging at various financial institutions across Europe and the United States.

Last year, six major banks (Citigroup, Barclays, JP Morgan, UBS, RBS, Bank of America) doled out $5.6 billion in Forex-related fines and admitted to criminal charges, with Citigroup paying the largest portion: a $925 million criminal fine and an additional Fed penalty of $342 million.

However, Mark Johnson and Stuart Scott - former head of cash trading at HSBC, who was also charged along with Johnson in the scheme - are the first individuals to face criminal prosecution for currency exchange rate rigging.

According to prosecutors, Johnson and Scott used insider information to profit illegally from a large Forex transaction by a client of HSBC, who was looking to exchange $3.5 billion British pounds.

Having foreknowledge of the large order, the defendants executed their own trades first, which affected the currency market and thus resulted in a worse currency exchange rate for the HSBC client.

While the affected party has not been named in court documents, a confidential source told Reuters that Cairn Energy, one of Europe's leading independent oil and gas firms, was the defrauded HSBC client.

Prosecutors revealed the illegal Forex transaction netted HSBC about $3 million in front running profits, and $5 million from executing the trade at the manipulated price.

Johnson has been free on $1 million bail, while Stuart Scott remains in the UK and has denied the allegations.

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  1. Big institutional traders who try to rig up the market should be punished at all costs. It's no surprise to hear such incidents. It's encouraging to see that the authorities are stepping up to take action and implementing necessary steps to put an end to such activities.

    We will also have to see how much of such incidents goes unnoticed and the real people who suffers massive losses due to greed and corruption of big traders.


  2. So, if some of my cynical friends wonder where all the bad fraudulent personalities end up after they perform numerous cases of the fraud- I will just point them to your article.

    I didn't expect to see the list of major banks (Citigroup, Barclays, JP Morgan, UBS, RBS, Bank of America) being included in the schemes like this - but, I guess it si not about the brands,m it is about the people who abuse them.

    As further into your article, it is an inside job - well, it always is. How else would they know all the peculiar details. I am glad the law covered this, they are not useless after all.


  3. Well, here we go again!


    That should be the formula, but does it always work?


  4. In cases like this there becomes an interesting dynamic between the actions of the individual and the actions of the company. Although it is the individuals themselves who have broken the law, they did it with the view to try and gain an advantage for their company (of course, there may have been incentives for them personally in doing this), yet it is the company name which is tarnished.
    On the converse, the company itself can only really be fined or banned from operating in a certain market - jail time can only go to the individuals involved, however if they were operating on behalf of their company is this fair?
    Insider trading is definitely not an acceptable practice, but providing a disincentive to the right entity isn't always a black and white case.