Third Barclays Trader Faces U.S. Charges in FX Scandal

(Bloomberg) -- The former head of New York foreign exchange trading at Barclays Plc’s investment bank became the lender’s third trader to face U.S. charges related to market manipulation, as prosecutors pursue officials responsible for misconduct that has led to $10 billion in fines.

Robert Bogucki, 45, faces seven charges over his role in a multimillion-dollar front-running scam that defrauded Hewlett-Packard Co., the U.S. Justice Department said Tuesday. The case relates to the manipulation of foreign-exchange options before HP’s $11 billion takeover of Autonomy Corp. in 2011, according to prosecutors.

“Bogucki and others allegedly not only betrayed his client’s confidences, but also risked undermining public trust in the foreign-exchange options market,” Assistant U.S. Attorney John P. Cronan said in a statement. We "remain committed to protecting American interests by investigating and prosecuting sophisticated schemes," he said.

U.S. authorities have been pursuing criminal prosecutions following a global crackdown on currency rigging that saw banks pay more than $10 billion in penalties. At least eight traders have been charged over behavior uncovered in the scandal, including three from JPMorgan Chase & Co., Barclays and Citigroup Inc. They’re known as the “Cartel,” and are scheduled to go on trial in June. 

The other Barclays traders, Chris Ashton and Jason Katz, were charged by the U.S. in separate price fixing cases. In October, former HSBC Holdings Plc currency trader Mark Johnson was found guilty of fraud for front-running a $3.5 billion client order.

Barclays was Hewlett-Packard’s financial adviser on the Autonomy transaction. Bogucki, who appeared in federal court in Brooklyn, New York, on Wednesday, was released on $500,000 bond and ordered to appear in federal court in San Jose, California. No date was set for that appearance. He’s charged with one count of conspiracy to commit wire fraud and six counts of wire fraud.

“Mr. Bogucki is innocent,” his lawyer, Sean Hecker, said in a statement. “He tried hard to do right by HP while following the rules that governed market makers in foreign exchange for many years. This action is nothing more than an unfair and misguided attempt to rewrite those long-standing rules.”

‘Spank the Market’

Bogucki allegedly misused confidential information Hewlett-Packard provided Barclays, which hired the bank to carry out a foreign-exchange transaction relating to its planned U.K. acquisition of Autonomy, according to the indictment. The transaction required the sale of 6 billion pounds ($8.3 billion) of options in September 2011, the Justice Department said.

While Bogucki promised HP the transaction "will be kept very quiet" and claimed he was "not touching the market," prosecutors say he instead declared during one telephone call, "we need to figure out what to do with this information," then directed options trading to try to lower the price of volatility -- a metric that affects the value of currency options -- to the benefit of Barclays at Hewlett-Packard’s expense. 

In electronic chats with Bogucki, one Barclays trader said he and other traders would “bash the sh-t out of” and “spank the market” to depress the price of volatility, according to the indictment. Bogucki directed Barclays FX traders to further depress the price for currency options but cautioned them they needed to be discreet to avoid the attention of senior Barclays executives, saying, "if it gets back to HP by some loose lipped market monger that we’re selling," he warned they’d be in trouble -- using profanities to emphasize the point.

Spokeswomen for Barclays and HP declined to comment.

Barclays was among four global banks that were ordered to pay a combined $2.5 billion to the Justice Department in 2015 after admitting to rigging currency rates. The federal judge who approved the penalties at a sentencing hearing last year urged U.S. authorities to pursue cases against individuals.

The acquisition of Autonomy has triggered lawsuits and a criminal case. Autonomy’s former chief financial officer Sushovan Hussain faces accounting fraud charges in federal court in San Francisco while Hewlett-Packard sued Hussain and Autonomy’s co-founder Michael Lynch in a London court alleging they misrepresented the company’s financial health before the takeover. Lynch filed a countersuit claiming his reputation was ruined.

U.S. prosecutors have faced criticism for deals with companies that result in large fines, but few charges against individuals. Sally Quillian Yates, the Justice Department’s former No. 2 official, said in 2015 that companies facing criminal investigations would have to turn over employees if they hoped to win reduced penalties.

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