UK Edition
Arrested HSBC exec was once head of compliance at his own hedge fund
The HSBC executive arrested last week in an American fraud probe was once responsible for regulatory compliance at a hedge fund he ran before joining the bank.
Mark Johnson, global head of foreign exchange cash trading at HSBC, was charged with conspiring to commit wire fraud on Wednesday after the US authorities stopped him at JFK Airport. He was in the process of moving his family to the States to take up a new role at the firm.
Before joining HSBC in 2010, he spent six years launching and running a loss-making hedge fund. According to Financial Conduct Authority records, Mr Johnson was responsible for overseeing compliance, money laundering reporting and handing out other duties at Johnson Stewart Partners, which he ran with two partners and around a dozen other staff.
The fund lost a total of £872,300 during its six years in business, while its members put a net £1.4m into the company. Johnson Stewart Partners reported static assets of $33m during its tenure, which was managed for unnamed clients.
Past employees of the hedge fund have moved into firms across the City including Panmure Gordon, M&G and Deutsche Bank, while several also spent time working with Mr Johnson at HSBC after he wound up the firm in 2010.
Mr Johnson, 50, has been bailed in New York following his arrest. He has been charged along with Stuart Scott, who left HSBC’s foreign exchange team in 2014, with conspiring to defraud a client of the bank by “front-running” a major currency trade.
The pair allegedly persuaded the energy firm Cairn to place its $3.5bn conversion into sterling at 3pm on a particular day in December 2011, before making their own trades in the minutes beforehand that ramped up the price of the pound.
According to the US Department of Justice, which has spent several years investigating the currency markets, this behaviour generated $8m in trading gains and extra fees.
It emerged last week that HSBC carried out an internal investigation into the Cairn trade but cleared the pair of wrongdoing.
HSBC has declined to comment. Mr Johnson could not be reached, while lawyers for Mr Scott have said he “strongly denies” the allegations.