HSBC Holdings Plc. code-named a $3.5-billion currency trade “Project Shine” and swore traders to secrecy to reassure its clients would get the best price.
Mark Johnson, then-head of global foreign exchange, was among those who knew, and Cairn Energy Plc. feared that news of the anticipated purchase of pounds would leak, Unites States prosecutors say. Instead, they say he bought sterling and tipped fellow traders, steps that gave HSBC $8 million in profit in December 2011.
“Ohhh, f__ing Christmas,’’ Johnson said as Cairn went on with the trade despite a rising price, prosecutors say.
Johnson, the first banker to go on trial following a crackdown on currency-market rigging, is accused of defrauding Cairn and breaching his duty to HSBC in what prosecutors say is a clear case of front-running. HSBC wasn’t named as a defendant in the indictment, but the bank itself has been under US criminal investigation over currency trading and is in active talks with the Justice Department and US regulators to resolve the matters, according to a July 31 regulatory filing.
Lawyers for Johnson are expected to argue that what he did was common in the $5.1 trillion-per-day currency market, by far the world’s largest. They have lined up witnesses to testify that HSBC’s traders provided best execution for Cairn, and that related trades were standard hedging practices, according to court papers. Jury selection begins on Monday in federal court in Brooklyn, New York.
Currency traders around the globe will be watching the case, wondering whether they need to change behavior.