The trial of Mark Johnson, HSBC’s former top trader and Head of Global FX Cash Trading, was concluded yesterday in New York. The three-week trial saw Johnson facing a barrage of allegations for his involvement in a $3.5 billion Cairn Energy transaction. The trial was capped off by a 5.5-hour testimony from the defense counsel.
The past three weeks have seen Johnson under siege for his dredged up statements surrounding his Cairn Energy transaction a few years ago. Johnson, a UK national, was originally apprehended at JFK airport last month. Prosecutors have been pinpointing a variety of circumstances and actions surrounding Johnson’s lead role in the trade, which saw the bank net nearly $8 million in illegal profits.
Johnson repeatedly pushed back against the allegations, suggesting that he was simply following a practice known as ‘pre-hedging’. His defense team cited numerous instances of cherry picking and a conspiracy against Johnson, who will face prison if convicted.
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Conversely, the prosecution had a number of tools in its arsenal, all provided from Johnson himself. From the beginning of the trial, Johnson had faced an uphill battle after multiple testimonials were brought to light as evidence. Recorded conversations picked up code words to his fellow traders, including the phrase ‘my watch is off’, which seemed to trigger frenetic buying action from the traders.
Moreover, 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”.
The two sides present an interesting and potentially historic precedent for the rest of the FX industry, namely in terms of how subsequent cases of alleged market abuse are handled. As a UK national, Johnson’s extradition has not been discussed presently, though prison time is likely the more immediate concern if convicted.
As recently as yesterday, prosecutors, including Brian Young, a justice department attorney, told jurors: “Trust your gut, trust your judgement, and trust your ability to know a scam when you see one.”
A verdict is expected shortly with each side having already delivered its closing remarks. Finance Magnates will continue to update the story as it develops.