Former HSBC trader found guilty for 3.5bln fraud

A former currency trader at HSBC faces up to 20 years in federal prison after being found guilty of executing trades in a way that drove up costs for a client.

Mark Johnson, who was HSBC's head of global cash foreign exchange trading, has been found guilty of defrauding Cairn Energy over a $3.5bn (£2.7bn) client order, following a month-long trial in NY. Prosecutor Carol Sipperly asked the court to order Johnson to surrender his passport and remain in New York. The judge ordered that he not seek a new passport from British authorities. She said the office would continue to prosecute those who "undermine public confidence in the operation of the financial markets by engaging in fraudulent schemes". He will be sentenced at a later date.

Prosecutors said oil and gas firm Cairn had chosen HSBC in 2011 to handle the conversion of $3.5bn (£2.7bn) in proceeds from the sale of one of its subsidiaries, into sterling.  Although Johnson, HSBC’s global head of foreign exchange in 2011, was in New York at the time of the transaction, the trade was executed primarily in London, where Johnson’s co-defendant, Stuart Scott, was overseeing it. Scott, the bank’s former head of currency trading in Europe, remains in the U.K. as he fights extradition to the U.S.

London-based HSBC wasn’t accused of wrongdoing, but the bank has been under investigation over currency trading and is in talks with the Justice Department and U.S. regulators to resolve the matters, according to a July 31 regulatory filing.

According to prosecutors, Johnson and Scott were among 11 currency traders feverishly buying pounds just before the Cairn transaction. The traders in New York and London jumped ahead, driving up the price of the pound to its highest in two days on Dec. 7, 2011, minutes before the 3 p.m. deal, according to the U.S. Prosecutors said the other traders were tipped by Johnson.

A spokesman for HSBC didn't immediately respond to requests for comment. During the trial, jurors heard numerous tape recorded phone calls between Johnson and others discussing the trade. 

Johnson was arrested by federal agents at New York’s Kennedy Airport in July 2016, just as he was about to board a flight to the UK. Johnson plans to appeal.