Federal agents surprised an HSBC Holdings Plc executive as he prepared to fly out of New York’s Kennedy airport late Tuesday, arresting him for an alleged front-running scheme involving a $3.5 billion currency transaction, according to three people familiar with the matter.
Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was held in a Brooklyn jail overnight and will appear in court Wednesday, one of the people said, asking not to be identified because the details of his arrest aren’t public. The U.S. unsealed charges against him and Stuart Scott, the bank’s former head of currency trading in Europe, making them the first individuals to be charged in the long-running probe.
The arrest and charges are a coup for the Justice Department, which has struggled to build cases against individuals in its investigation into foreign-exchange trading at global banks. U.S. prosecutors once had so much confidence in the quality of evidence they were gathering thanks to undercover cooperators that in September 2014, then-Attorney General Eric Holder said he expected charges against individuals within months. The U.K. Financial Conduct Authority also found it difficult to make cases against currency traders and announced in March that it was dropping its efforts.
U.S. agents moved quickly to arrest Johnson, who works in London and New York, to avoid difficulties that could arise in extraditing him, according to one of the people. The complaint against Johnson and Scott was unsealed Wednesday in Brooklyn federal court. HSBC wasn’t made aware of the plans to arrest Johnson, another person said.
Scott left the bank in 2014 after it agreed to pay $618 million to settle currency-rigging investigations by the FCA and the U.S. Commodity Futures Trading Commission. He remains in the U.K., and the U.S. is likely to seek extradition, according to one of the people.
Rob Sherman, an HSBC spokesman, and Peter Carr, a Justice Department spokesman, declined to comment. Johnson and his lawyer, Frank Wohl, didn’t immediately respond to calls seeking comment. Contact information for Scott wasn’t immediately available in U.K. directories.
Johnson’s arrest comes more than a year after five global banks pleaded guilty to charges related to the rigging of currency benchmarks. HSBC, though it settled regulatory cases, is still being investigated by the Justice Department. The bank has set aside $1.3 billion for possible settlements, according to an August filing.
For a QuickTake explainer on the benchmark probes, click here.
Separately 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 a statement Tuesday. That matter is separate from the one involving Johnson, the people said.
Gardiner has been helping U.S. prosecutors who are trying to build currency-rigging cases against individuals for violation of antitrust laws, two people familiar with the matter told Bloomberg News in April. He hasn’t been publicly charged and it isn’t clear if he has been granted immunity for cooperation. A lawyer for Gardiner didn’t respond to an e-mail seeking comment.
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