The former head of the FX trading desk of Barclays in New York, Robert Bogucki, is being charged by the US Department of Justice (DoJ) for front-running. The charges stem from the execution of a big foreign exchange order that was submitted by HP in 2011.
Bogucki is said to have participated in a “multimillion-dollar front-running scheme” as part of the execution of an “exceptionally large trade” ordered by the Palo-Alto based tech giant, HP.
Commenting on the action, Acting Assistant Attorney General Cronan said: “Robert Bogucki and others allegedly not only betrayed his client’s confidence but also risked undermining public trust in the foreign exchange options market.”
“The Criminal Division and our law enforcement partners remain committed to protecting American interests by investigating and prosecuting sophisticated schemes such as the one alleged in this indictment,” Mr Cronan added.
£6 Billion Worth of Options
According to the indictment filed on the case, between September and October 2011, Bogucki misused information that was provided to him by the corporate client. HP confided to Barclays that the foreign exchange order is part of an acquisition effort in the UK. The deal included a total transaction that was worth £6 billion.
The bank was given a mandate to sell the set amount of options in September 2011. Due to the size of the transaction, the bank and its employees, including Mr. Bogucki, agreed to keep the information about the deal confidential.
Instead, according to the indictment, Bogucki and the FX options trading desk of Barclays agreed to depress the price of volatility to the detriment of HP and to the benefit of the bank and its employees.
Inspector General Lerner explained: “The indictment returned today charges a fraudulent manipulation scheme where the defendant betrayed Barclays’ client by lying and misusing the client information, and then masked the activities.”
Bogucki and some other employees of the bank allegedly misused the information in their position to “bash the sh*t out of” and “spank the market” to depress the price of volatility. Some other Barclays traders also discussed “hammer[ing] the market lower”. The move would significantly decrease the value of the options of HP.
Earlier this week, a former foreign exchange trader fired by Barclays said that he was a scapegoat. He claimed that the British bank dishonestly contrived his dismissal to divert attention away from its own failings related to ‘last look’.