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HSBC trader's conviction will echo through $5-trillion FX market

25 October 2017

The jury heard that Mark Johnson orchestrated a scheme to deal for HSBC before trading on behalf of their client Cairn Energy, who wanted to convert $3.5bn from dollars to sterling.

A former HSBC executive faces up to 20 years in prison after he was found guilty of defrauding a client in currency deal worth $3.5bn by a NY court.

Mark Johnson, a British citizen and former HSBC's global head of foreign exchange trading, was accused of defrauding Scottish oil and gas developer Cairn Energy PLC by front running its currency exchange order. U.S. District Judge Nicholas G. Garaufis of the Eastern District of NY presided over the trial.

Traders will nearly certainly come under pressure to avoid conduct that could be seen as harming their clients and profiting unfairly at their expense, said Mayra Rodriguez Valladares, a former foreign-exchange analyst for the Federal Reserve Bank of NY.

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He was arrested in July 2016 and indicted a month later in August.

A date for sentencing has not yet been set.

HSBC generated profits of $8 million from the transaction: $3 million from front-running and a $5 million fee from the client.

His lawyer argued that Johnson's actions were standard practise in FX trading and the United Kingdom oil and energy company got a "fair" price.

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U.S. attorney Robert L Capers of the Eastern District of NY, assistant attorney general Leslie R Caldwell of the justice department's Criminal Division, acting inspector general Frederick W Gibson of the Federal Deposit Insurance Corporation (FDIC), and assistant director in charge Paul M Abbate of the FBI's Washington Field Office, made the announcement.

Shortly before the transaction, which occurred in December 2011, Johnson and other traders acting under his direction purchased Pound Sterling for their own benefit in their HSBC "proprietary" accounts.

As part of the fraud, Johnson and his co-conspirators misrepresented information to the client to hide their deceit - generating $7.3m in profits.

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HSBC trader's conviction will echo through $5-trillion FX market