HSBC’s executive has been arrested in New York with fraud in connection foreign exchange transaction in 2011.
According to Federal prosecutors, Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was held in a Brooklyn prison overnight and will appear in court on Wednesday. The U.S. unsealed a complaint against him and Stuart Scott, the bank’s former head of currency trading in Europe, making them the first individuals to be charged in the long-running probe.
Federal prosecutors said that Mr. Johnson and Mr. Scott used the information about their client’s currency transaction to trade ahead, pocketing a $3 million profit for the bank. The bank also made $5 million in fees from the transaction. The transaction was undertaken following the sale of Cairn’s India subsidiary to Vedanta, which is owned by the mining magnate Anil Agarwal.
“The defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars,” Robert L. Capers, the United States attorney for the Eastern District of New York, said in a statement.
The two allegedly conspired to take advantage of inside information about an unidentified company’s plans to sell part of its stake in an Indian subsidiary, according to the complaint. The client was Cairn Energy Plc, which was selling the unit to Vedanta Resources Plc. HSBC was hired to trade about $3.5 billion in proceeds of the sale to pounds. Johnson and Scott began buying pounds in the days before the transaction, anticipating that they would cause the price of pounds to spike, then execute the transaction, making the pounds they’d bought earlier more valuable.
Leslie R. Caldwell, the head of the Justice Department’s criminal division, said, “The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank.”