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Business Crimes Hotline
HSBC Resolves Wire Fraud Charges
On Jan. 18, 2018 HSBC Holdings plc (HSBC) entered into a deferred prosecution agreement (DPA) and agreed to pay $101.5 million in criminal penalties and disgorgement to resolve two counts of wire fraud under 18 U.S.C. §1343.
In 2010 and 2011, HSBC was hired by two clients to execute multi-billion dollar foreign exchange transactions. After completing confidentiality agreements for the planned transactions, HSBC's former Head of Foreign Exchange, Mark Johnson, and his team first purchased British Pound Sterling (GBP) for HSBC proprietary accounts. The “front-running” scheme sought to use the future client transactions to drive the price of GBP in a direction that would benefit the bank's account. HSBC traders then executed the clients' transactions, the second of which was for the exchange of $3.5 billion. Johnson and his team structured the clients' trades to maximize the price increase of GBP, which ultimately benefitted Johnson and his co-conspirators at the expense of the client.
Further, HSBC made misrepresentations to Carin Energy, the victim of the 2011 trade, to conceal the nature of their transactions. HSBC later admitted to the Department of Justice (DOJ) that they made approximately $38.4 million from the first transaction in March 2010, and approximately $8 million from the transaction in December 2011. The bank settled with Carin for approximately $8 million, which the DOJ credited as full restitution.
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