Top HSBC Banker Arrested In US Fraud Case

A senior HSBC executive faces fraud charges over a currency trade from which the bank allegedly profited at a client's expense.

Mark Johnson, the London-headquartered lender's head of global foreign exchange cash trading, and Stuart Scott, a former colleague, were accused on Wednesday of defrauding an unnamed company by 'front-running' a $3.4bn purchase of sterling for their own benefit.

The charges were brought by the US Attorney's office, and mark the latest development in a worldwide trading scandal which has seen many of the banking industry's biggest names fined hundreds of millions of pounds.

In a copy of the complaint filed at the US District Court in New York, the two HSBC employees are accused of "using information provided in confidence to HSBC by the Victim Company to purchase Sterling in advance of the transaction, knowing that the transaction would cause the price of Sterling to increase, thereby generating substantial trading profits for HSBC and the defendants".

In 2014, lenders including HSBC, JP Morgan and Royal Bank of Scotland (LSE: RBS.L - news) were fined more than £1bn by the UK watchdog for their role in manipulating foreign exchange markets.

Regulators in the US, Europe and elsewhere have also imposed substantial penalties on banks, taking the total fines to around $10bn.

The latest charges essentially amount to allegations of insider trading in the vast foreign currency markets, in which roughly $5 trillion changes hands globally every day.

While the UK's Serious Fraud Office has had some success prosecuting traders for their role in the Libor scandal, the agency said in March it was dropping its forex probe because there was "insufficient evidence for a realistic prospect of conviction"

HSBC refused to comment.