$3.5bn HSBC fraud arrests: 'It's unethical, illegal and for personal gain'

'It's referred to as front-running' - Expert explains HSBC's Mark Johnson fraud charges

A financial expert explains the charges a prominent HSBC banker faces

Thursday, July 21, 2016

Financial specialist Chris Justham has told talkRADIO that the multi-billion pound fraud for which HSBC's British global head of foreign exchange trading has been arrested and charged is "unethical, illegal and for personal gain". 

Mark Johnson was arrested by the FBI in New York City on Tuesday night as he tried to board a transatlantic flight from New York to London. 

Johnson, a British citizen, and fellow banker Stuart Scott – HSBC's European head of foreign exchange dealing in London – have been charged with conspiring to defraud clients by "corruptly manipulating the foreign exchange market to benefit themselves and their bank". 

The transaction in question had a value of $3.5 billion (£2.7bn), with an alleged profit for Johnson and Scott, of around $3m (£2.3m).

Last year, fines totalling $5.6bn (£4.2bn) were handed down to six banks in the US for conspiracy to fix the foreign exchange market. HSBC were not one of those banks. 

Justham, a relationship manager from Seven Investment Management, explained the charges for which the pair are yet to be tried. 

"It's referred to as front-running," he told Julia Hartley-Brewer. 

"What it means is you have privileged information. You've got a client who wants to place a big trade, and you're advising them when to buy or sell.

"If you've got information you know will move the market, in this case a [multi] billion purchase in dollars to be changed back to sterling...if you're going to make this exchange at that kind of level, it would push the value of the pound up." 

The FBI allege that Johnson and Scott bought pounds in advance of the exchange, knowing the value of sterling would subsequently go up and they could sell the currency at a profit. 

"It's unethical," Justham said. "Because not only is it illegal, you're taking this information for your own gain."

Listen to the full interview above