Last Updated Jul 20, 2016 6:38 PM EDT
NEW YORK - HSBC Bank's (HSBC) head of foreign exchange cash trading was released on $1 million bail Wednesday after his arrest at a New York airport on charges he traded ahead of his customers to make millions of dollars in a scheme known as "front running."
Mark Johnson, 50, a U.K. citizen and a U.S. resident, was arrested Tuesday night at Kennedy Airport and charged in a criminal complaint with conspiracy to commit wire fraud. Also facing the same charge but not in custody was Stuart Scott, 43, a U.K. citizen and resident who formerly was HSBC's head of foreign exchange cash trading for Europe, the Middle East and Africa.
"The defendants placed personal and company profits ahead of their duties of trust and confidentiality owed to their client, and in doing so, defrauded their client of millions of dollars," U.S. Attorney Robert Capers in Brooklyn said in a release.
Defense attorney Frank Wohl declined comment after Johnson was released on $1 million bail after an initial court appearance before a magistrate judge in Brooklyn federal court. It was not clear whether Scott has representation.
The arrest stems from actions Johnson and Scott allegedly took in November and December 2011 when authorities say they misused confidential information given to them by a client who wanted the bank to execute a foreign exchange transaction related to the planned sale of part of its ownership interest in an Indian subsidiary. The client was not identified by name in court papers.
Prosecutors say Johnson and Scott and other traders they directed bought British pound sterling for HSBC's "proprietary" accounts prior to converting about $3.5 billion in sales proceeds on behalf of the client into British pound sterling, knowing the large transaction would boost the price of sterling. This enabled them to generate $8 million, some of it illegally, to the benefit of HSBC and at the expense of their client, authorities said.
"The defendants allegedly betrayed their client's confidence, and corruptly manipulated the foreign exchange market to benefit themselves and their bank," said Assistant Attorney General Leslie Caldwell.
The bank is not accused of any wrongdoing.