One of HSBC’s former top traders and Head of Global FX Cash Trading Mark Johnson defended his actions this week during a trial in New York. Johnson attempted to shoot down the allegations of market manipulation and illicit gains, affirming the fairness of his actions in a $3.5 billion Cairn Energy transaction.
Johnson’s trial kicked off last week in New York, having originally apprehended the UK national in JFK airport last month. Prosecutors had been pointing to a variety of circumstances and actions surrounding Johnson’s lead role in the Cairn Energy trade, which saw the bank net nearly $8.0 million in illegal profits.
From the onset of the trial Johnson has been on the defensive after facing particular damning testimonial evidence. Recorded conversations picked up code words to his fellow traders, including the phrase ‘my watch is off’, which ultimately triggered the frenetic buying action from the traders.
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Additionally, US prosecutors obtained a statement regarding the Cairn trade – that was like “f***ing Christmas”. Prosecutors also claimed that he discussed how high the currency prices could go with other traders before Cairn would later “squeal”.
However, these allegations have done little to deter Johnson, who has all along affirmed his innocence in the matter. Since last week, his legal team had been pushing back the allegations, including those surrounding his cryptic use of code words, asserting that the term ‘watch’ was unrelated to his actions. According to Johnson’s lawyer John Wing, “‘My watch is off’ is a code designed to tell people keep this confidential, don’t let the salesmen know about it.”
Johnson’s latest defense this week entailed his innocence and handling of the banks ‘routine’ procedure. He stated that HSBC had followed a commonly deployed pre-hedging practice, also reiterating its legitimacy. Conversely, prosecutors maintained he illicitly schemed the 2011 deal, which turned a large profit for the bank, per an FT report.
When asked how he described the eventual outcome of the deal, he responded: “I was surprised. It was a lot better than expected outcome for HSBC. But I felt it was fair all round . . . For the risk that HSBC took, the outcome was fair.”
The fallout has been of particular relevance given that Johnson, a UK national, was seized in the United States at JFK airport. His case may serve as a litmus test for future currency manipulation scandals. Finance Magnates will continue to update the story as it develops.