HSBC forex official arrested in the US over role in rigging currency benchmarks: Sources

NEW YORK (BLOOMBERG) - A senior manager at HSBC Holdings Plc was arrested in New York for his role in a conspiracy to rig currency benchmarks, according to two people familiar with the matter, becoming the first person to be charged in the United States Justice Department's three-year investigation into foreign-exchange rigging at global banks.

Mark Johnson, HSBC's global head of foreign exchange cash trading in London, was taken into custody at John F. Kennedy International airport on Tuesday (July 19) and was scheduled to appear before a judge in federal court in Brooklyn on Wednesday (July 20), said the people, who asked not to be named because the case has not been made public.

He has been charged with conspiracy to commit wire fraud involving front-running client orders, the people said, the first individual to be charged in the long-running probe.

Johnson's arrest comes more than a year after five global banks pleaded guilty to charges related to the rigging of currency benchmarks.

Mr Stuart Scott, HSBC's head of foreign-exchange cash trading for Europe, was also accused in the complaint, which was unsealed on Wednesday in Brooklyn federal court.

HSBC, which was not part of those criminal cases, in November 2014 agreed to pay US$618 million in penalties to US and British regulators to resolve currency manipulation allegations.

HSBC, which still faces investigations by the Justice Department and other authorities for the conduct, has set aside US$1.3 billion for possible settlements, according to an August filing.

HSBC was not made aware of the planned arrest, one of the people said. More than two-dozen traders have been suspended by their banks in the course of the investigation.

Mr Rob Sherman, an HSBC spokesman, and Mr Peter Carr, a Justice Department spokesman, declined to comment.

The Justice Department has faced skepticism over its ability to charge individuals in the case, although people familiar with the probe told Bloomberg News that charges could come by this summer.

Also on Tuesday, the US Federal Reserve banned former UBS Group AG trader Matthew Gardiner from the banking industry for life for his role rigging currency benchmarks. Gardiner used electronic chat rooms to facilitate the manipulation of foreign exchange benchmarks and to disclose confidential customer information to traders at other banks, the Fed said in a statement on Tuesday.

That matter is separate from the one involving Johnson, the people said.

Mr Gardiner has been helping US prosecutors who are trying to build currency-rigging cases against individuals for violation antitrust laws, two people familiar with the matter told Bloomberg News in April.

He has not been publicly charged and it is not clear if he has been granted immunity for cooperation.

A lawyer for Mr Gardiner did not respond to an e-mail seeking comment.