An HSBC Holdings Plc. executive and a former employee have been barred from the banking industry by the Federal Reserve as they face U.S. criminal charges that they committed fraud in conducting foreign-exchange trades.
The Fed’s move follows the August indictments of Mark Johnson, who was HSBC’s head of foreign exchange cash trading, and Stuart Scott, the bank’s former head of currency trading in Europe. The men, both British citizens, are accused of using insider knowledge to front-run a $3.5 billion currency deal in 2011 that made the bank $8 million in profits.
The Justice Department, which charged Scott and Johnson as part of a long-running probe, accused them of trading ahead of the foreign-exchange transaction in a way that benefited their trading books. Under the Fed’s ban, the two men are prohibited from participating at any bank until the criminal charges are “resolved or disposed of.” Johnson was also suspended by the Office of the Comptroller of the Currency.
“This suspension is based solely on the existence of the indictment, which is entirely unfounded,” Frank H. Wohl, an attorney for Johnson at Lankler Siffert & Wohl, said in a statement. “Neither the Fed nor the OCC conducted any independent investigation of the transactions charged. When all the facts come out it will be clear that Mr. Johnson engaged in no wrongdoing.”
Rob Sherman, a spokesman for HSBC, declined to comment. Scott’s attorney couldn’t immediately be reached for comment.