(Bloomberg) -- Former HSBC Holdings Plc trader Mark Johnson, the first person to be convicted in a global crackdown on currency rigging, was ordered freed from prison as he pursues an appeal arguing that he didn’t know he was breaking U.S. law.
The U.S. Court of Appeals in Manhattan granted Johnson’s request Tuesday to be released in a brief order. Johnson was sentenced in April to two years behind bars and was immediately taken into custody.
A federal jury in Brooklyn, New York, found Johnson, the bank’s former global head of foreign exchange, guilty of nine counts of wire fraud and conspiracy for front-running a $3.5 billion client order in December 2011. He was convicted in October after a monthlong trial.
The case had been considered a victory for U.S. prosecutors, as Johnson was the first person tried since the global currency-rigging scandal that resulted in the world’s largest banks paying more than $10 billion in penalties. In January, HSBC paid $100 million to resolve a U.S. Justice Department probe into the rigging of currency rates tied to the case.
Johnson’s lawyers told the federal appeals court on Tuesday that as a U.K. citizen, Johnson had no warning he was violating U.S. wire-fraud statutes. They also questioned whether U.S. law can apply to foreign-exchange trading conducted under a contract that disclaims any fiduciary duty between two sophisticated parties.
Prosecutors claim Johnson’s own testimony at the trial indicated he was aware he wasn’t permitted to profit from confidential information and said on a bank-recorded call that HSBC wouldn’t "ramp" currency prices.
That appeals judges ordered Johnson freed on bail without issuing an explanation, but left it to U.S. District Judge Nicholas Garaufis to determine the conditions of his release. It is unclear when he will be released and whether there must be a hearing in Brooklyn federal court.
Frank Wohl, a lawyer for Johnson, didn’t return a voicemail seeking comment. Johnson is still in federal custody, according to the U.S. Bureau of Prisons website and a spokesman didn’t immediately return calls seeking information.
John Marzulli, a spokesman for the Brooklyn U.S. Attorney Richard Donoghue, declined to comment.
HSBC was hired by Cairn Energy Plc to convert the proceeds of the sale of a subsidiary from dollars into pounds. Johnson and his colleagues promised to "drip feed" the transaction to avoid an unexpected rise in the currency rate. Cairn was defrauded because it paid a higher price for the U.K. currency after Johnson and his traders "ramped" up the pound, according to a government expert’s testimony.
Prosecutors argued to the jury that while Johnson promised Cairn that the bank would keep its information confidential, he instead used it and tipped off at least 10 other HSBC traders who began a buying spree that drove the pound up to its highest in two days. As a result, the bank made a collective $8 million in profit.
Johnson, a U.K. citizen based in London, was in the bank’s New York office on the day of the Dec. 7, 2011 transaction and testified at trial that he’d left a colleague in charge of the deal.
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