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Between 2004 and 2006, HSBC’s foreign exchange trading desk was flooded with “corrupt culture,” and bankers abused confidential information to “preempt” customer orders and filed charges in the High Court of the United Kingdom on Monday.
These allegations were made at the beginning of the seven-week trial in which the currency manager ECU Group accused HSBC of fraud and misconduct in connection with 52 foreign exchange transactions conducted by the bank during this period. HSBC denies these claims for a variety of reasons.
This case may reopen the old wounds in the 6.6 trillion US dollars per day foreign exchange market. In 2013, the market was shocked by allegations that some global banks have systematically manipulated currency prices over the years. HSBC paid US$343 million in fines and damages to the Financial Conduct Authority and US$276.5 million to the Federal Reserve for its failure to monitor foreign exchange transactions between 2008 and 2013.
As a customer of HSBC, ECU accused HSBC traders of improper conduct in the lawsuit, including preemptive transactions, which used confidential information about upcoming customer orders to conduct transactions. It also accused HSBC’s private bank HBPB of engaging in “idea theft” by adding secret “ideas” or markups to the execution price reported to the ECU to ensure illegal profits.
ECU first complained to HSBC about unusual foreign exchange price changes in February 2006, but was informed after HSBC’s internal investigation that there was no evidence of impropriety.
ECU began reviewing these transactions again in 2016, when the U.S. Department of Justice issued a formal indictment against two former HSBC foreign exchange traders, accusing them of preemptive transactions at the expense of another HSBC customer, Kane Energy.
On Monday, ECU’s barrister Richard Lissack QC claimed to the High Court that the lawsuit was related to a “shameful incident” in HSBC’s history.
“The case of ECU is that HSBC’s foreign exchange trading desk was rotten from 2004 to 2006. Traders viewed customer orders as opportunities for self-fulfillment,” Lissack claimed.
In his written argument, Lissack claimed that HSBC’s traders viewed ECU transactions as “easy targets.”
HSBC will hold a court hearing on Tuesday. The bank stated in its written document that ECU’s “incredibly old allegations are outdated” because the alleged incident occurred more than 15 years ago, and described ECU’s lawsuit as “artificial and legally unlawful”. Coherent claims”.
“ECU is now making a cynical and opportunistic attempt to restore these old claims, which it could and should pursue in 2006, if any,” it claimed.
“The relevant order is not preemptive. Except for some isolated incidents, HSBC has not committed the wrongdoing alleged by ECU,” it said in its written argument, adding that it denied any fraud or deliberate concealment in the case. The case is still going on.
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