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HSBC Bankers Charged in United States Currency Case




An HSBC Holdings Plc Executive was ready to fly out around 7:30 last Tuesday evening. 

He was surprised when Federal agents showed up at New York’s Kennedy airport and arrested him. 

He was arrested for allegedly taking part in a front-running scheme in 2011 that involved a three and a half billion-dollar currency transaction.

Mark Johnson was held overnight in a jail in Brooklyn.  

According to prosecutors, the global head of HSBC for foreign exchange and cash trading located in London was due for a court appearance that Wednesday.

The United States lead a complaint against both him and the former head of currency trading in Europe for HSBC, Stuart Scott. 

This act made them the first people to face charges for the long-running probe.

Building the Case

Both the arrest and the charges are simply a coup for the Justice Department. 

The Justice department has struggled with the task of conducting an investigation into foreign exchange trading that takes place within global banks and building a case.

At one time, United States prosecutors held a lot of confidence in the quality of the evidence they were finding, thanks to the use of undercover cooperators. 

They had so much confidence in this evidence that Eric Holder, the Attorney General at that time, had said he expected to be able to charge individuals within a few months’ time back in September 2014.

The Currency Investigation

Prosecutors have been targeting individuals on the basis that they might have been involved with manipulating foreign-exchange benchmarks.

Holder reported back in 2014 that undercover cooperation had taken place in order to help prosecutors build their case.

He said that cooperators often were able to provide evidence that there was an intent to commit fraud. 

He says that this evidence is critical in order to make a case that financial executives had committed illegal acts. 

A number of informants have assisted in the department’s investigations about the rigging of bench mark, insider trading, and interest rates.

The following shows how interest rate parity holding in the foreign exchange market is done. 

This is in the event that the returns on investment domestically equal those of investing abroad.

hsbc bankers 1

Holder stated that charging individuals deters criminal activity in a way that going after the companies involved cannot. 

The cooperation agreements that existed between the banks and the Justice Department helped provide a lot of information for the federal prosecutors working on the case.

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The Timeline

The United Kingdom Serious Fraud Office also had difficulties when trying to build a case against currency traders. 

In March, the Serious Fraud Office made the announcement that they were dropping the efforts they had made. 

Here’s how the benchmark probes unfolded:

  • 2008
    • Reporters from various newspapers began reporting concerns that the London interbank rate was being influenced.
  • 2010
    • The United States CFTC ordered banks to carry out their own investigations into practices
  • 2012
    • June
      • Barclays became the first bank to settle with regulators. He paid $450 million.  Bob Diamond, CEO, resigned
  • 2013
    • May
      • CFTC began interviewing various traders about ISDAFix
      • The European Union raided the BP and Shell in oil benchmark probe
    • June
      • Articles published by Bloomberg alleging that the occurrence of deceiving currency benchmarks was taking place.
    • November
      • The United Kingdom confirmed the review of benchmarks being used in the gold and silver markets.
    • December
      • European Union found out that nine banks were involved in a cartel aimed at rigging interbank rates. They were fined 1.7 billion euros
  • 2014
    • November
      • Six banks agreed to pay United States, Swiss, and United Kingdom regulators $4.3 billion. This was the currency probes’ first settlement.
  • 2015
    • April
      • $2.5 billion paid by Deutsche Bank in order to settle with United Kingdom and United States Libor probes
    • May
      • $5.8 billion paid by 6 more banks in order to settle a currency-rigging case with the United States Justice Department
    • August
      • Tom Hayes was the first trader to be tried and convicted of Libor-rigging
  • 2016
    • January
      • 6 brokers are acquitted from charges accusing them of helping Hayes
    • March
      • The United Kingdom dropped the criminal investigation they were conducting to find individuals accused of currency rigging
    • July
      • Former Barclays traders are found guilty of Libor rigging

The following shows how swap payments work between the banks and different clients:

hsbc bankers 2

Leslie Caldwell, the Assistant Attorney General, emailed a statement saying that the case illustrated the commitment of the criminal division to hold corporate executives responsible for the crimes they had committed. 

She specifically stated that this commitment included the world’s most sophisticated and largest institutions.

Below is a visual representation of how a realistic triangular arbitrage scene should work. 

Sample bids and ask prices quoted by banks are used.

hsbc bankers 3 


Scott and Johnson are accused of conspiring to take advantage of inside information they had acquired about a company deciding to sell some of its stake in an Indian subsidiary. 

They didn’t not know which company it was.

According to people who were aware of the transaction, the company was Cairn Energy Plc. 

It is said that they had planned on selling to Vedanta Resources Plc. 

HSBC was hired in order to trade around $3.5 billion of the proceeds from the sale to pounds.

Johnson and Scoot began by ramping

This means that they bought pounds’ days before the transaction to take place so that they could cause the price of pounds to rise. 

The complaint says that once they bought the pounds, they executed the transaction, and the pounds that they bought before carrying out the transaction thus became more valuable.


The complaint states that Scott and Johnson informed the client that the deal should take place around 3 p.m. 

They told the client that this would provide an element of surprise and allow the client to get a better rate.

When 3 p.m. rolled around, there was less liquidity available than at 4 p.m. 

This made the act of manipulation easier. 

It should also be noted that they informed the client liquidity at each point was around the same.

Johnson, Scott, and the traders they told to do so, all ramped the price. 

The pound reached the highest it had in two days at 2:56 p.m. in London. 

Scott informed Johnson that the client was going to go ahead with the full transaction despite the fact that the price had spiked.

It is reported in the complaint that Johnson responded to this by saying the un-censored version of Oh f’ing Christmas. 

When all was said to done, HSBC and the internal accounts for both Scott and Johnson reaped around $8 million for this front-running, according to Robert Capers. 

Robert Capers is a U.S. Attorney in Brooklyn.

It is said that the defendants not only allegedly betrayed the confidence of their client, but also manipulated the foreign exchange market in order to reap rewards for themselves and the bank they worked for, according to Caldwell. 

The complaint says that Johnson and Scott told their client in following conversations that an unidentified bank in Russia was responsible for the rise of the pound.

An HSBC spokesman, Rob Sherman, and a Justice Department spokesman, Peter Carr, both refused to comment on the situation.

Johnson and his lawyer did not respond to calls requesting comments immediately. 

Frank Wohl is Johnson’s attorney. 

Scott’s contact information was not readily available in the United Kingdom directories.


Both Johnson and Scott are citizens of the United Kingdom. 

According to the document, because there was fear that Johnson and a resident of bot the United States and the United Kingdom would run if they found out about the United States complaint, it was kept under seal.  

Federal agents were quick to move in order to arrest Johnson.

Johnson works in London and in New York. 

The agents moved quickly so that they could avoid any issues that might arise as they tried to extradite him, according to an informant who has information on the issue.

The HSBC was not made aware that there were plans made to arrest Johnson.

The person who provided this information asked to remain anonymous because these details have not been released to the public.

Scott left HSBC back in 2014 after the bank agreed to pay $618 million in order to settle currency rigging investigations conducted by the United Kingdom Financial Conduct Authority and the United States Commodity Futures Trading Commission.

Scott, 43-years-old, is still in the United Kingdom. 

According to one source, it is expected that the United States is going to try and extradite him back to the United States to face charges.

Johnson’s arrest follows over a year after five global banks plead guilty to charges of rigging the currency benchmarks. 

The Justice Department continues to investigate HSBC, regardless of the fact that HSBC settled regulatory cases. 

$1.3 billion has been set aside by the bank, according to a filing in August, in order to cover possible settlements.

The following shows total fines paid by banks up to now:

hsbc bankers 4


The investigation conducted by the Justice Department looked at the world’s largest banks and the manipulation of the currency markets has primarily focused on two issues:

  • It has looked at whether or not bankers from competing institutions colluded to sway benchmarks in their favor. This would have violated antitrust laws.
  • It has looked at whether or not bankers were taking client orders and then committing fraud.

Federal prosecutors located in Brooklyn teamed with Washington’s Justice Department’s fraud section to bring the charges against Scott and Johnson.

In Other News

Last Tuesday, Matthew Gardiner was banned by the United States Federal Reserve for life from anything to do with the banking industry. 

Gardiner was banned for his role in rigging currency benchmarks. 

Gardiner is a former UBS Group AG trader.

Gardner utilized chat rooms online in order to facilitate his part of rigging benchmarks and to disclose customer information that was confidential to traders located within different banks, according to a Federal Reserve statement made last Tuesday. 

The names that Gardiner used in these chat rooms included The Cartel and The Mafia.

The statement said that the bank stated that the Fed was prohibiting a former foreign exchange trader from participating in the banking industry. 

It further stated his name and what he was accused of. 

It says that he engaged in practices that were unsafe and unsound.

People are saying that the situation with Gardiner is different from the situation with Johnson and Scott.

In April, two people that are familiar with what is going on told Bloomberg News that Gardiner is currently assisting United States prosecutors that are trying to build cases against individuals they suspect are guilty of currency-rigging. 

They are aiming at charging them with violating antitrust laws.

Gardiner has not been charged publicly at this time. 

This makes whether or not immunity was granted in return for his cooperation unclear. 

An e-mail was sent to Gardiner’s attorney requesting comments, though the attorney did not respond.

The Fed Cracks Down

In April, reports came that United States officials were getting ready to charge a number of manipulators during the summer. 

The fed has recently been belligerent over the past few years when it comes to punishing individuals engaging in this activity.

Goldman Sachs Group Inc. barred on of their employees last year because they were stealing information from the market. 

Credit Suisse Group Ag barred five employees for helping their clients get out of paying taxes.

The six banks who were fined last year had to agree to investigations against their employees and are prohibited from re-hiring or communicating with individuals that had conducted these activies.

Gardiner was part of an instant messaging group known as the Cartel. 

This was at the center when five banks plead guilty to charges last year, according to people familiar with the situation.

United States said traders who were working for the institutions that were convicted in 2015 had conspired to fix currency benchmarks by using this instant-messaging group. 

This group was originally called the Mafia. 

These banks were:

  • Citigroup Inc.
  • UBS
  • JP Morgan Chase & Co
  • Barclays Plc
  • Royal Bank of Scotland Group Plc


Enforcement actions were brought over the manipulation of currency by the Fed last year against Barclays Plc and UBS. 

Gardiner used to work at Barclays Plc. 

This enforcement resulted in Barclays and UBS paying penalties that equaled up to $684 million, according to the Fed.

The following chart shows the 2008 annual report on the common equity to assets ratio for the four largest U.S. banks:

hsbc bankers 5

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Stocks Rally as Oil, Jobless Claims Rocket Higher




Stocks Rally as Oil, Jobless Claims Rocket Higher

The stock market rally continued yesterday with the Dow Jones Industrial Average jumping 2.24%, the S&P 500 gaining 2.28% and the Nasdaq up 1.72%.

Investors felt optimistic after President Trump tweeted that he had spoken with Saudi Arabian Crown Prince Mohammed bin Salman. Many were hoping that both Saudi Arabia and Russia were willing to end the price war and mutually agree to cut production by at least 10 million barrels per day.

“Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia, & I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!” Trump tweeted.

However, some experts are doubting the reality of cutting production by such a significant amount.

Edward Marshall, a commodities trader at Global Risk, told The Wall Street Journal, “It’s physically impossible for Saudi Arabia and Russia to get 10 million barrels a day off the market—they’d burst their onshore storage and fill every ship in sight.”

News also broke that Saudi Arabia called for an emergency meeting of OPEC and other oil-producing countries. The country called for a meeting to talk about how they can stabilize the oil market. Prices have been in freefall since the last meeting ended without a production agreement beyond April 1.

This was enough to send oil prices rocketing higher. West Texas Intermediate crude gained as much as 34% intraday before settling at $25.32 per barrel, a 24.7% jump. This is its largest single-day percentage gain in history.

Even with prices moving higher, it may not be enough to prevent bankruptcies in the oil and gas sector. This wave of bankruptcies was kicked off by shale driller Whiting Petroleum Corp. on Wednesday.

Jobless Claims Set Record

The market’s rally yesterday came in spite of some very bad news early in the day. Initial jobless claims for the week ending March 28 came in at 6.6 million. This figure is nearly double the previous week’s then-record of 3.2 million.

To put this number in a historical perspective, prior to the last two weeks, the previous record number of claims in a single week sat at 665,000 in March 2009 during the Great Recession.

To put it simply, this week’s initial jobless claims number was equal to the total claims filed during the entire Great Recession.

Chris Rupkey, chief financial economist for MUFG Banks, wrote in an email, “We knew that massive job losses were coming because of reports that many workers were unable to file a claim for benefits even after waiting on line for hours. Everywhere you look Washington and state governments were not prepared for the rapid spread of the virus and the devastating damage that would be done to the economy if businesses were shut down and workers sent home.”

He added “In a normal recession, job layoffs build over the many months of recession until they peak. In this pandemic-based recession, the job losses are immediate where the economy’s weakest hour is right now.”

Why was the market able to rally despite historically bad jobless claims?

JJ Kinahan, chief market strategist at TD Ameritrade, says it’s possible that the market knows it’s going to get worse. He also mentioned that this number won’t seem as bad in the coming weeks.

“Overall this is a little bit of a victory in and of the fact that it was such a bad number and the market did kind of shake it off. It is also the market preparing for a lot more bad numbers.”

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US Federal Reserve Makes Emergency Interest Rate Cut




US Federal Reserve Makes Emergency Interest Rate Cut

The US Federal Reserve has slashed interest rates in an emergency move to protect the world’s largest economy from the coronavirus outbreak, ramping up the global response as the disease spreads.

In a dramatic intervention as the G7 group of wealthy nations promised action around the world to protect jobs and growth amid the unfolding crisis, the US central bank said it was cutting interest rates by half a percentage point to a target range of 1% to 1.25%.

Launching the emergency measure as a pre-emptive strike to protect the US economy after pressure from Donald Trump to act, the Fed warned: “The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity.”

Jerome Powell, its chair, said: “Of course the ultimate solutions to this challenge will come from others, particularly health professionals. We can and will do our part, however, to keep the US economy strong as we meet this challenge.”

As the economic costs mount in a pivotal US election year, Trump said the Fed had not cut rates enough and should go further. Powell insisted the emergency move was not in response to the president’s pressure. “We are never going to consider any political considerations whatsoever,” he said.

Financial markets around the world rallied after the worst week for stocks since the financial crisis, in anticipation of massive coordinated stimulus to protect the global economy. The FTSE 100 closed up around 1% at 6,718.20. However, Wall Street slumped after a rebound on Monday, and was down 600 points by mid-afternoon in New York.

On a day of rapid developments in response to the escalating health crisis:

  • The G7 issued a statement saying wealthy nations would use “ all appropriate policy tools ” to tackle the economic fallout.
  • The UK government outlined contingency plans, including limits on police and fire service callouts.
  • Growing numbers of companies announced profit warnings and told staff to work from home.

Speaking on Tuesday morning before the emergency move from his transatlantic counterpart, Mark Carney said the Bank of England stood ready to cut rates if the British economy required.

In his final hearing before MPs on the Treasury committee before standing down on 15 March, when he will be replaced by Andrew Bailey, the Bank’s outgoing governor said the fallout in Britain could include an “economic shock that could prove large but will ultimately be temporary”.

“The Bank will take all necessary steps to support the UK economy and the financial system,” he added.

Carney said that lines of communication were open with other central banks, that the Bank’s rate-setting monetary policy committee (MPC) met on Monday and that it was still “assessing the economic impacts and considering the policy implications of various different scenarios”.

The next MPC rate decision is due on 26 March, after Carney leaves. However, economists at the Japanese bank Nomura said they anticipated an emergency UK rate cut before the end of the week.

Threadneedle Street has limited room to cut borrowing costs with interest rates at 0.75%, among the lowest levels in its 325-year history. There are also growing expectations that the chancellor, Rishi Sunak, will use next week’s budget to announce financial support to try to lessen the impact of Covid-19.

The coronavirus outbreak is causing widespread alarm. The Paris-based Organisation for Economic Cooperation and Development has warned global growth could be cut in half.

UK banks are starting to offer emergency financing to businesses that are showing signs of strain. Barclays, RBS and Santander have sent messages to thousands of firms to check whether factory disruptions in China have put their supply chains and cash flow at risk.

Barclays has extended its first batch of overdrafts and short-term loans, while the Guardian understands RBS is contacting about 5,000 of its large and small business customers who may be exposed to disruption, offering them similar support.

Twitter told its staff to work from home in response to the outbreak. It has made remote working mandatory for employees in Hong Kong, Japan and South Korea and said it was “strongly encouraging” its global workforce of 5,000 employees to do the same.

In the UK, the impact of the outbreak was reflected in company statements and updates on consumer behaviour. Kantar, the data company, said consumers were stockpiling hand sanitiser, with sales up 225% in February.

The British insurer Direct Line said it had received £1m of travel insurance claims relating to the outbreak. It will pay out for cancellation or curtailment of trips to places such as China, South Korea and northern Italy, if they were booked before the government advised against travel.

The product-testing company Intertek warned that temporary disruption to the supply chains of its clients in China would hit its 2020 performance, while Greggs said the coronavirus added a cloud of uncertainty to its future sales forecasts if shoppers stayed away from high streets.

The tour operator Tui also said it had suffered weaker bookings and set out plans to cut costs with a hiring freeze and postponing non-essential projects. After a plunge in its share value amid the coronavirus outbreak, the travel business is likely to be ejected from the FTSE 100 on Wednesday in the quarterly reshuffle of the index of leading UK company shares.

Copyright © 2020 All rights reserved.

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How To Teach Your Kids About Credit Cards




If you have kids in college, this article is for you. Teaching kids about credit cards is one of the most important tools you can give them The world of credit cards can be confusing and giving your kids a little education might save them a lot of headache and debt.

Students need to learn credit card lessons


Do you have children in college? Have you talked with them about how to handle credit?
When I wrote about this topic in 2008, students were inundated with credit card offers. According to Benjamin Lawsky, who, as a special assistant to the New York state attorney general, testified before the U.S. House of Representatives’ Subcommittee of Financial Institutions and Consumer Credit, “marketers set up tables in high-traffic spots on campus, such as cafeterias, student unions, bookstores, and other campus buildings … [and at] campus events including freshman orientation, activity fairs, athletic events and graduation fairs.”

Then came the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the CARD Act).

Now, companies cannot sign up individuals under the age of 21 without a co-signer or proof of personal financial resources. Marketers offering incentives like pizza can no longer do so while at “an institution of higher education” or even within 1,000 feet of the school. They also may not make such offers “at an event sponsored by or related to” the school. Pre-approved offers of credit to individuals under the age of 21 also are prohibited.

Still, card offers are being made, and students need to know whether to act on them. You can expect that student credit cards will have less favorable terms than those offered to people who have a credit history; students are higher-risk borrowers.
Further, students, even those over age 21, may not understand that missing a payment or making a late payment not only increases the cost of credit, but also creates a negative credit history, something everyone should work to avoid.

“A bad credit history can make it harder for you to get mortgages, car loans and credit cards in the future,” explained Matt Schulz, a senior industry analyst at, a credit card comparison website.

“If you do get them, crummy credit can also cost you a fortune over the years in the form of higher interest rates and fees. It can also stand in the way of getting a job,” explained Schulz.

What can a parent do?
Since going away to college is the first step toward independence, you want to be sure that you respect your child’s need for self-sufficiency. But that doesn’t mean he or she has to go it alone. There are simply too many serious, long-lasting repercussions.

Communication and planning are key.

First, before your child leaves for school, talk to him or her about the benefits and the detriments of getting a student card. Establishing a credit history is a benefit. So is learning the discipline of paying bills on time to avoid a negative history.

Second, research options together with your child. Look online at (search for “student cards”), (click on “Credit Cards,” then “College Student”) or (go to “Credit Cards,” then “Student”). Consider the fees, rates and penalties of different cards, and make a joint decision on the type of card that might make sense. For example, you might consider prepaid cards or secured cards. Prepaid cards work like debit cards. No credit is extended. You prepay the card, and when the balance is low, you fund it. Secured cards require a cash deposit that acts as the credit line for the account. This allows a credit limit to be established, without risk to the bank.

Third, decide on an acceptable monthly budget and what to do if it isn’t followed.  Talk about how you would like your child to communicate with you if that happens.

Fourth, determine whether you and your child agree that he or she should not accept credit card offers before reviewing them with you.

Fifth, agree on how the two of you should check in with each other. Will you talk each month about finances, perhaps setting a date in advance? Will you encourage your child to let you know about challenges before they become problems?

In the beginning, your child will benefit from some gentle guidance. You don’t want him or her to be adrift in a financial morass that could have been avoided with a little planning and care. Financial literacy calls for learning a new skill, and it is not reasonable to expect a child to go on this financial journey alone.

For information on the impact of the CARD Act, read the Consumer Financial Protection Bureau’s report (the Card Act Report), which you can find at

* * *
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/comments ([email protected]). To hear Julie speak, visit

(c) 2018 Julie Jason.
Distributed by King Features Syndicate Inc.

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