HSBC Global Head Of FX Cash Trading Arrested At JFK Airport

Tyler Durden's picture

A historic event took place moments ago when Mark Johnson, the global head of cash FX at HSBC was arrested at JFK airport for his role in a "conspiracy to rig currency benchmarks", and specifically for frontrunning customer orders. He is the first person charged by the US in the ongoing FX rigging probe.

As Bloomberg reports, a "senior manager at HSBC Holdings Plc was arrested in New York for his role in a conspiracy to rig currency benchmarks, according to two people familiar with the matter, becoming the first person to be charged in the Justice Department’s three-year investigation into foreign-exchange rigging at global banks."

The DOJ adds that Mark Johnson, 50, a U.K. citizen and U.K. and U.S. resident, and Stuart Scott, 43, a U.K. citizen and resident, were charged by complaint with conspiracy to commit wire fraud.  Johnson was arrested last night at JFK International Airport in Queens, New York, and will be arraigned later today before U.S. Magistrate Judge Lois Bloom of the Eastern District of New York

From Johnson's bio:

Johnson is global head of foreign exchange cash trading at HSBC, based in London. Prior to joining HSBC in 2010, he was founding managing partner and chief investment officer at Johnson Stewart Partners. Before that, he was global head of trading at Deutsche Bank.

More details:

Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was taken into custody at John F. Kennedy International Airport Tuesday and is scheduled to appear before a judge in federal court in Brooklyn Wednesday morning, said the people, who asked not to be named because the case hasn’t been made public. He’s charged with conspiracy to commit wire fraud, the people said.

 

According to Bloomberg, Johnson’s arrest comes more than a year after five global banks pleaded guilty to charges related to the rigging of currency benchmarks. HSBC, which wasn’t part of those criminal cases, in November 2014 agreed to pay $618 million in penalties to U.S. and British regulators to resolve currency manipulation allegations. HSBC, which still faces investigations by the Justice Department and other authorities for the conduct, has set aside $1.3 billion for possible settlements, according to an August filing.

 

Rob Sherman, an HSBC spokesman, and Peter Carr, a Justice Department spokesman, declined to comment.

From the DOJ complaint:

“As alleged, 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,” stated United States Attorney Capers.  “When questioned by their client about the higher price paid for their significant transaction, the defendants wove a web of lies designed to conceal the truth and divert attention away from their fraudulent trades.  The charges and arrest announced today reflect our steadfast commitment to hold accountable corporate executives and licensed professionals who use their positions to fraudulently enrich themselves.”

 

“The defendants allegedly betrayed their client’s confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank,” said Assistant Attorney General Caldwell.  “This case demonstrates the Criminal Division’s commitment to hold corporate executives, including at the world’s largest and most sophisticated institutions, responsible for their crimes.”

The full details, as revealed in the DOJ complaint, allege that in November and December 2011, Johnson and Scott misused information provided to them by a client that hired HSBC to execute a foreign exchange transaction related to a planned sale of one of the client’s foreign subsidiaries. 

HSBC was selected to execute the foreign exchange transaction – which was going to require converting approximately $3.5 billion in sales proceeds into British Pound Sterling – in October 2011. 

HSBC’s agreement with the client required the bank to keep the details of the client’s planned transaction confidential.  Instead, Johnson and Scott allegedly misused confidential information they received about the client’s transaction. 

On multiple occasions, Johnson and Scott allegedly purchased Pound Sterling for HSBC’s “proprietary” accounts, which they held until the client’s planned transaction was executed.  The complaint alleges that, as part of the scheme, both Johnson and Scott made misrepresentations to the client about the planned foreign exchange transaction that concealed the self-serving nature of their actions. 

Specifically, the complaint alleges that Johnson and Scott caused the $3.5 billion foreign exchange transaction to be executed in a manner that was designed to spike the price of the Pound Sterling, to the benefit of HSBC and at the expense of their client.  In total, HSBC allegedly generated profits of roughly $8,000,000 from its execution of the FX Transaction for the Victim Company, including profits generated from the front running conduct by Johnson, Scott, and other traders whom they directed.

* * *

Also on Tuesday, the U.S. Federal Reserve banned former UBS Group AG trader Matthew Gardiner from the banking industry for life for his role rigging currency benchmarks.  Gardiner used electronic chat rooms, with names including The Cartel and The Mafia, to facilitate the rigging of foreign-exchange benchmarks and to disclose confidential customer information to traders at other banks, the Fed said in astatement Tuesday. That matter is separate from the one involving Johnson, the people said.

Recall that DOJ unwillingness to prosecute HSBC was the ultimate catalyst that prompted former AG Eric Holder to admit that some banks are "too big to prosecute." Perhaps with this arrest things are slowly starting to change.

Now, if frontrunning clients is officially an arrest-worthy offense, we can't wait for the DOJ to unleash a crackdown on criminal HFT algos whose only purpose in "life" is to do just that.

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Captain Benny's picture

Its just for show so that the Obama admin can say "we arrested the corrupt bankers" and help Hillary run on the tailwinds.

Hopeless for Change's picture

First arrest, 3.5 months before the election.  Nice.

MagicHandPuppet's picture

He must have not met his campaign contribution minimun this season.

Son of Loki's picture

After 8 years the doj finally arrested one measley banker?

I don't see this going anywhere given his defense lawyer already filed a motion to dismiss citing his client was simply "excessively careless" with "no intent" to deceive or rig the markets.

 

I hear there's some solid precedent on this.

froze25's picture

So still nothing on the massive Drug money laundering...

Diet Coke and Floozies's picture

But he didn't intend to do it.

tc06rtw's picture

   
 “…  not met his campaign contribution minimum this season”? …   More likely his check bounced.
  

Maplehood's picture

I'm sure glad that rigging stuff doesn't happen in the gold and silver market

Four chan's picture

l he be the first banker to ever go to jail?

Here2Go's picture
Here2Go (not verified) Four chan Jul 20, 2016 3:50 PM

He looks like the Pillsbury dough boy... GO GET HIM LORETTA!

ATM's picture

HSBC..... Isn't that the place James Comey used to work? Hmmmm. Perhaps this guys knows something.

sgt_doom's picture

But as President Obama, presidential candidate Hillary Rodham Clinton (and hubby, Billygoat) have all claimed,

 

". . the bankers didn't break any laws!"

 

Of course, one must be completely ignorant of all those laws they did break, millions of times over:

Law of Fraudulent Conveyance

Massive securities fraud (invalid securitizations --- each and every one of the mortgage securitizations didn't follow the Pooling and Servicing Agreements, plus the same mortgages were used multiple times in various invalid securitizations)

Massive tax fraud --- because the mortgages and promissory notes weren't physically moved into the trusts (REMICs), the tax exemption protocols were invalidated, incurring 100% penalties --- thus hundreds of billions, if not trillions, are owed the IRS.

Millions of felonies committed in the filing of false affidavits (robo-signing)

Millions of false documents submitted to the courts to expedite fraudclosures (each and every one a felony, thus millions of more felonies committed).

Millions of violations of basic contract law --- only parties to a contract can sue, and illegal parties (MERS, various banksters) sued in pursuit of fraudclosures.

Millions of mortgage fraud committed.

Massive notary fraud

Etc., etc., etc.!

 

Recommended Reading:

Chain of Title     by David Dayen

Reckles$ Endangerment    by Gretchen Morgenson

Wall Street Capitalism:  the theory of the bondholding class  by E. Ray Canterbery

Wealth, Power, and the Crisis of Laissez-Faire Capitalism   by Donald Gibson

Open Secret    by Erin Arvedlund

 

TheVillageIdiot's picture

I guess his emails were more worthy of prosecuting...

crazzziecanuck's picture

Make sure the arrests are non-Americans from non-American banks.

Looks more and more like WADAs ridiculous crap against Russia isn't so exceptional after all.

11b40's picture

And once again, it is foreign bankers who get busted.  Never any of the Amerian Saints on Wall St.

philipat's picture

And it's NEVER a US bank or Banker is it? That is, of course, because the US Banks are all just "Doing God's work"?

And if he's flying (First Class) commercial through JFK he can't be that important, can he?

Kirk2NCC1701's picture

Tactically, he should've booked his flight via Tel Aviv, on El Al, with a 1-2 day layover.

They wouldn't have arrested him then, appearing to be "Doing God's work".

If you're gonna be devious, don't take half measures.

Bob's picture

Hell no.  What a loser . . .

If he were somebody, his corporate jet would have parked on the tarmac for a strictly social visit with the AG. 

Duh.

But maybe the corporate jet was "unexpectedly detained" somewhere . . . the Bosses wouldn't want the bank logo to show up in the pics, after all.

Pladizow's picture

Meaningless until this is done to a NY Bank!

venturen's picture

hold your breath...1,2,3....

RockRiver's picture

He must have pissed somneone off....

bada boom's picture

Must of been trying to frontrun the frontrunners.

philipat's picture

Or didn't pay an agreed bribe?

E.F. Mutton's picture

He didn't kick enough upstairs for Tony Soprano Feldstein. 

FinalEvent's picture

Quick, don't let him grab a nailgun

Due North's picture

....and perhaps to begin the paper trail back to Deutsche to provide the MIC with an escape hatch via plausible deniability 

sgt_doom's picture

This article says he's a global head, a global head?

And you know what happens to global heads, right?

https://www.youtube.com/watch?v=KHNhcOEGtew

Hail Spode's picture

The only reason this guy got arrested was that he and his partner were personally ripping off the big players. They were not acting on behalf of the bank. If they were ripping off hordes of little guys on behalf of the big guys they would be untouchable. The big boys just don't want any of their middle-men ripping THEM off, only the rest of us.

Conax's picture

 

"May I suggest using your nightstick, officer?"

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Conax Jul 20, 2016 9:58 AM

#BanksterLivesMatter

spanish inquisition's picture

Was he wearing his AG/FBI cufflinks?

Ralph Spoilsport's picture

This guy must have really pissed off the wrong people to get very publicly nailed at the airport. 

WillyGroper's picture

he was skimmin the cartel's heroin booty.

PT's picture

And he did it secretly all by himself.  No-one else was involved at all and the cops only just figured it out right now.

PT's picture

He thought he was not replaceable.
He thought they were his friends.

Lorca's Novena's picture

They decide to arrest him? What happened to silencing the "IN" crowd via nailguns and falling ot of windows? Maybe the JUSTUS Dept. needs to draw attention away from promoting a race war, ignoring a criminal presidential candidate, and supporting the new Dictatorship over in the Turkeys...

 

Or, Pay off the Lynch Bitch and walk away....

PT's picture

They must like him.
"No, we get 90% and you get 10%.  10% is plenty."
"This is your last chance to help us steal some more money"
... that kind of thing.

PT's picture

... and he has no dirt on his supervisors.

Herdee's picture

Just use the NSA's technologies to help you get more of the crooks.This is the type of nonsense that spying technology should be used on.

j0nx's picture

Looks like someone forgot to make their donation to the appropriate foundation.

Squid Viscous's picture

Put him in a cell with Corzine! oh, wait

heddahenrik's picture

The DoJ, controlled by the American banksters, arrested a foreign bankster.

The shitheads are turning on each other. Now time to kick out the criminal American banks from EU? There is no lack of proof.

Son of Loki's picture

The real charges stem from his comments on Twitter denying climate change. The market rigging is a mere triviality that will be dismissed later.

taketheredpill's picture

did he wet his pants?

philipat's picture

And the CFTC to look at the Bullion Banls trading on Comex?

wobblie's picture

It's a start.

On to Wall Street, City of London, Tokyo and Berlin. Decimate the financial industry.

https://therulingclassobserver.wordpress.com/2016/07/17/on-superior-beings/

SgtShaftoe's picture

yea, preferably with an AC-130 gun ship.  Don't come back with any extra ammo either.