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HSBC Holdings Agrees to Pay More Than $100 Million to Resolve Fraud Charges

Posted  January 19, 2018

By the C|C Whistleblower Lawyer Team/em>

United Kingdom-based global financial services company HSBC Holdings plc entered into a deferred prosecution agreement and agreed to pay a $63.1 million criminal penalty and $38.4 million in disgorgement and restitution to resolve charges that it engaged in a scheme to defraud two bank clients through a multi-million dollar scheme commonly referred to as “front-running.” The DPA, which was filed in connection with a two-count criminal information charging wire fraud in the United States District Court for the Eastern District of New York, is pending review by the Court.

“HSBC’s admissions in connection with this resolution confirm that the company misused confidential client information for its own profit on more than one occasion,” said Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division. “This sort of misconduct not only harmed their clients, costing the victims money, but it also ran a serious risk of undermining the public’s confidence in our financial markets. The Department of Justice takes these types of cases seriously and will hold to account financial institutions and individuals that circumvent the rule of law in favor of illicit profits.”

According to HSBC’s admissions, on two separate occasions in 2010 and 2011, traders on its foreign exchange desk misused confidential information provided to them by clients that hired HSBC to execute multi-billion dollar foreign exchange transactions involving the British Pound Sterling. After executing confidentiality agreements with its clients that required the bank to keep the details of their planned transactions confidential, traders on HSBC’s foreign exchange desk transacted in the Pound Sterling for the traders and HSBC’s own benefit in their HSBC “proprietary” accounts. HSBC traders then caused the large transactions to be executed in a manner designed to drive the price of the Pound Sterling in a direction that benefited HSBC, and harmed their clients. HSBC also made misrepresentations to one of the clients, Cairn Energy, to conceal the self-serving nature of its actions. In total, HSBC admitted to making profits of approximately $38.4 million on the first transaction in March 2010, and approximately $8 million on the Cairn Energy transaction in December 2011.

Pursuant to its agreement with the Justice Department, HSBC agreed to pay a criminal penalty of $63.1 million. HSBC also agreed to continue to cooperate with the department and with foreign authorities in any ongoing investigations and prosecutions relating to the conduct (including of individuals), to enhance its compliance program, and to pay $38.4 million in disgorgement and restitution for its conduct related to one of the two victim companies. HSBC previously settled with the other victim company, Cairn Energy, for approximately $8 million, which the Department credited as full restitution for Cairn. DOJ

Tagged in: Financial and Investment Fraud, Financial Institution Fraud,

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