Confronted by Cairn officials about the rise in the pound, the U.S. said Johnson’s co-conspirator Stuart Scott then falsely blamed it on an order by a Russian Central Bank, when none was placed with HSBC that day, according to the government. Scott, the former head of the bank’s currency trading in Europe, is in the U.K. fighting extradition.
Johnson took the stand at his trial, insisting Cairn got a "fair" price, arguing HSBC was only "pre-hedging" the trade. Johnson also sought to distance himself from the transaction, saying he’d left Scott, who was in London, in charge of the trading desk while he was in New York on the day of the Cairn trade.
Johnson, a U.K. citizen with a home in Hampshire, asked to serve a term of house arrest in the U.K. doing community service. Almost 130 relatives, friends and former bank colleagues wrote to Garaufis seeking leniency. Johnson’s wife, Diane Minihane, and his lawyers argued he was punished enough by being prosecuted and that further separation from his six children would be unnecessarily harsh.
Prosecutors used HSBC’s recorded calls which they said showed real-time talk of the front-running, including one in which Johnson and Scott discuss how high the price of the pound could rise before the client would "squeal." In another, in Johnson tells Scott, “I think we got away with it."
The government also had emails and instant messages by Johnson and his colleagues. They said Johnson sent out a message using the code words "My watch is off," it alerted at least 10 other traders on both sides of the Atlantic to began a buying spree of pounds that dominated the market minutes before the 3 p.m. deal.
Daniel Mantini, a former currency trader at Salomon Smith Barney and Bear Stearns who left the industry in 2012, said sending Johnson to prison would be a "travesty of justice."
"If they were going to arrest every foreign-exchange dealer for front-running big orders and/or talking smack over the phone there would be many thousands in jail," Mantini said. "This guy was in the wrong place at the wrong time."
The case is U.S. v. Mark Johnson, 16-CR-457, U.S. District Court for the Eastern District of New York (Brooklyn).
This article was provided by Bloomberg News.