The FBI arrested a senior HSBC banker as he attempted to board a transatlantic flight as part of the US Department of Justice's long-running investigation into an alleged rigging of the foreign exchange market.
HSBC foreign exchange market chief Mark Johnson is accused of using insider information to profit from artificially inflated trading prices, which the Briton allegedly used to make millions. At the heart of the scheme is the pound sterling, a currency which received volatile treatment from the market after the United Kingdom voted to leave the European Union in the Brexit vote. Johnson and former HSBC foreign exchange head in London Stuart Scott are innocent until proven guilty, but the wider implications of currency manipulation should serve as a reminder that global banks should never be considered "too big to fail". If the defendants are found guilty, HSBC must be held responsible for allowing them to manipulate the markets.
FBI Accuses British HSBC Bankers Of Defrauding Clients
HSBC's Mark Johnson was arrested before he was due to fly to London from New York. Johnson was scheduled to be formally charged by a federal judge in Brooklyn, and was later released on bail.
Stuart Scott, a second British citizen and former HSBC employee, has also been accused of manipulating the foreign exchange market to make more money from investors. US assistant attorney general Leslie Caldwell explained the charges in a statement.
"The defendants allegedly betrayed their client's confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank," she said. "This case demonstrates the [US Department of Justice's] criminal division's commitment to hold corporate executives, including at the world's largest and most sophisticated institutions, responsible for their crimes."
Scott and Johnson both live in London, and allegedly made millions by fraudulently trading currencies in 2011. According to investigators, the British bankers artificially spiked the value of the pound sterling to bolster their own profits.
The FBI doubled down on its commitment to fight currency fraud after Johnson's arrest.
"These individuals are accused of defrauding clients by misusing confidential information to manipulate currency prices for the benefit of the bank and themselves," FBI official Paul Abbate said. "The FBI will continue to work aggressively with our partners to prevent, investigate and prosecute criminal fraud in the financial markets."
The Guardian says the arrest carries broad implications
They are the first people to be charged in connection with the US government's long-running investigation into bankers' alleged rigging of the $5.3tn (£4tn) per day forex market...The justice department is conducting a criminal investigation into some global banks' alleged currency manipulation, and more than two dozen traders have been suspended by their employers.
New York Times notes the bank has been a problem in the past
The global banking giant HSBC has repeatedly found itself in the cross hairs of American regulators and prosecutors in recent years. To settle allegations of money-laundering and mortgage abuses, it has paid billions of dollars -- but has not been criminally charged. That has spurred an outcry that the bank is "too big to jail."
Bloomberg explains the background
his is the less interesting claim. More important, and more damaging, is what Johnson and Scott allegedly did in the hour before Cairn's trade, when they did have a live order. Actually the problem started when they were finalizing the order. Cairn wanted to buy at the fix, the hourly benchmark FX price.