Ex-HSBC Trader Denied Supreme Court Appeal of Fraud Conviction
(Bloomberg) -- Mark Johnson, the former global head of foreign exchange at HSBC Holdings Plc, failed to get the U.S. Supreme Court to hear an appeal of his 2017 conviction for front-running a $3.5 billion client order.
The high court rejected Johnson’s petition without comment. Justice Sonia Sotomayor did not participate in the decision. A federal appeals court in Manhattan previously rejected Johnson’s arguments that he didn’t know he was breaking U.S. law because no one previously had been prosecuted for wire fraud and conspiracy for similar conduct.
Johnson, who was sentenced to two years in prison, was the first person convicted in a global crackdown on foreign-exchange bid-rigging.
In his petition to the Supreme Court, Johnson said federal prosecutors had improperly used U.S. mail- and wire-fraud statutes in “novel and expansive ways,” applying them to currency transactions that should be considered the “private affairs of sophisticated businesspeople.” Letting the appeals court ruling stand “would criminalize entirely legal industry practices,” he said.
Johnson’s conviction stemmed from his work for Cairn Energy Plc in December 2011. HSBC was hired by Cairn to convert the proceeds of the sale of a subsidiary from dollars into pounds. A federal jury in Brooklyn, New York, found Cairn was defrauded because it paid a higher price for the U.K. currency after Johnson and his traders “ramped” up the pound despite promising that they’d “drip feed” the transaction to avoid an unexpected rise in the exchange rate.
“Ohhhh, f***ing Christmas,” Johnson said when he learned from Stuart Scott, the former head of foreign-exchange trading for HSBC in Europe, that Cairn was still going ahead with the full transaction despite the spiking price. HSBC made $8 million on the deal.
Confronted by Cairn executives about the rise in the pound, Stuart falsely blamed it on an order by the Russian central bank, prosecutors said. In 2018, U.K. Court of Appeal judges rejected a request by prosecutors to send Scott to the U.S. to stand trial.
The U.S. evidence against Johnson included recordings of calls and chat messages by Johnson and others. Prosecutors said Johnson signaled traders around the globe to start a buying frenzy that caused the pound to jump by saying, “my watch is off.” He also was heard later on one call telling a colleague, “I think we got away with it.”
HSBC later agreed to pay about $100 million in penalties and entered into a deferred prosecution agreement with the U.S. Justice Department.
Johnson was released after serving three months in prison and allowed to return home to the U.K. while he pursued his appeal. He will now have to return to the U.S. to begin serving his sentence.
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