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Between 2004 and 2006, HSBC’s forex trading bank permeated a “rotten culture,” with bankers making inappropriate use of confidential information to “deal” with customer orders.
The allegations were filed at the start of a seven-week trial in which foreign exchange manager ECU Group has accused HSBC of fraud and misconduct related to 52 foreign exchange transactions it conducted with the bank during that period. HSBC denies the claims for several reasons.
The case threatens to reopen old wounds in the $ 6.6 million a day foreign exchange market, which was shaken by allegations in 2013 that several world banks had systematically manipulated currency prices for years. HSBC paid $ 343 million in fines and refunds to the Financial Conduct Authority, as well as $ 276.5 million to the U.S. Federal Reserve for failures in its oversight of foreign exchange trading between 2008 and 2013.
ECU, which was an HSBC customer, alleges misconduct on the part of HSBC merchants in the lawsuit, including advance trading: trading with confidential knowledge of an upcoming customer order. He also alleges that HBPB, HSBC’s private bank, participated in “pip thefts” where it added secret “pips” or increases in run prices reported to the ECU to make an illegal profit.
The ECU first complained to HSBC about unusual price movements in exchange rates in February 2006, but after an internal investigation by HSBC it was told that there was no evidence of wrongdoing.
The ECU began reviewing operations again after 2016, when the U.S. Department of Justice issued a formal indictment against two former HSBC FX traders related to alleged frontal interventions at the expense of another HSBC client: Cairn Energy.
On Monday, Richard Lissack QC, an ECU lawyer, claimed in the High Court that the lawsuit was related to a “shameful episode” in HSBC’s history.
“The case of the ECU is that HSBC’s currency trading service between 2004 and 2006 was rotten. Traders treated customer orders as an opportunity for personal enrichment, ”Lissack said.
In his written arguments, Lissack claimed that HSBC traders considered ECU operations to be an “easy target.”
HSBC will have to open the case on Tuesday. In its written communications, the bank said the “incredibly old allegations are time-barred” because the alleged incidents took place more than 15 years ago and described the ECU’s lawsuit as a “farrago of artificial and legally inconsistent claims. “.
“The ECU is now engaged in a cynical and opportunistic attempt to resurrect these obsolete claims, which it could and should have pursued, if anything, in 2006,” he says.
“The relevant orders were not complied with and, apart from a few isolated incidents, the HSBC parties did not make the alleged ECU complaints,” he said in the written arguments and added that he denied that there was fraud or deliberate concealment in the case. The case continues.
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