HSBC agrees to pay more than $100M to resolve fraud charges
HSBC Holdings (HSBC) has entered into a deferred prosecution agreement and agreed to pay a $63.1M criminal penalty and $38.4M 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 DOJ confirmed.
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.
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.
In total, HSBC admitted to making profits of approximately $38.4M on the first transaction in March 2010, and approximately $8M on the Cairn Energy transaction in December 2011.
HSBC did not receive credit for voluntarily disclosing the misconduct.
HSBC received substantial cooperation credit because, although as detailed in the DPA, the bank’s initial cooperation with the government’s investigation was deficient in certain respects, after being notified of the Department’s concerns, HSBC changed course and its cooperation improved substantially.
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