HSBC Wins Case of Ex-Client Who Said Bank Was Front-Running

Jonathan Browning
·2 min read

(Bloomberg) --

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HSBC Holdings Plc won a U.K. case against a former client who had accused the bank’s traders of front-running over 15 years ago, shutting down efforts to re-open a turbulent period on the bank’s foreign exchange desk.

A London judge ruled that currency investment firm ECU Group Plc brought the claims too late, saying that the company used the trial to make “colorful” allegations about widespread misconduct among HSBC’s FX traders without offering enough evidence.

ECU Group had argued that the bank’s currency team deliberately traded ahead of client orders to make a profit, saying HSBC manipulated rates between 2004 and 2006 that affected billions of dollars of orders. But Judge Clare Moulder dismissed the claim Monday, saying ECU couldn’t simply point to adverse U.S. and U.K. findings against the bank over a later period to argue that the misconduct also took place five years earlier.

In its lawsuit, ECU had relied upon previous regulatory actions including when HSBC acknowledged it defrauded two clients by front running in 2010 and 2011 and agreed to pay about $100 million in a deferred prosecution agreement with the U.S. Justice Department. ECU’s lawyer had called its own case a “chronological prequel.”

Mark Johnson, HSBC’s former global head of foreign exchange, was jailed for using his advance knowledge of a big client order to trade ahead of it. His deputy Stuart Scott successfully fought extradition to the U.S. after British judges ruled that much of the alleged misconduct took place in the U.K.

HSBC said it welcomed the ruling. Lawyers for ECU Group said the firm “is understandably disappointed with today’s judgment, and will be taking time now to consider the decision and reasoning and look at next steps.”

(Updates with comment from ECU’s lawyers in sixth paragraph.)

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