Former Barclays FX Head in NYC Charged for Front Running

Robert Bogucki, the former head of Barclays’ New York FX operation was charged yesterday in an indictment for his alleged role in a scheme to front run client orders.

Bogucki has been charged in an indictment filed in the Northern District of California on January 16, with one count of conspiracy to commit wire fraud and six counts of wire fraud. He was due to make his initial appearance on January 17, at 2:00pm in Brooklyn, New York, before US Magistrate Judge Cheryl Pollak of the Eastern District of New York.

According to the indictment, in September and October 2011, Bogucki is alleged to have misused information provided to him by Hewlett Packard (HP), which had hired Barclays to execute an FX transaction related to the planned acquisition of a UK-based company. 

Barclays was selected to execute the FX transaction – which required the sale of £6 billion of options – in September 2011.  According to legal documents, Bogucki and other Barclays employees are said to have assured HP and its employees that they understood the need to keep the planned transaction, which was exceptionally large, and therefore “market-moving,” confidential. Instead, they allegedly used the confidential information received to manipulate the price of “volatility,” a metric that affects the value of FX options. 

According to the US Department of Justice, during conversations with Bogucki, one Barclays trader stated that he and other traders would “bash the sh*t out of” and “spank the market” to depress the price of volatility. Other Barclays traders are alleged to also have discussed “hammer[ing] the market lower” in order to decrease the value of HP’s options.

The indictment alleges that, as part of the scheme, Bogucki made misrepresentations to HP and its employees about Barclays’ activities and the state of the options market that concealed the “self-serving nature” of Barclays’ actions. Specifically, the indictment alleges that Bogucki directed options trading in a way that was designed to depress the price of volatility, to the benefit of Barclays and at HP’s expense.

As ever, it is worth remembering that the charges in the indictment are merely allegations, and the defendant is presumed innocent unless proven guilty beyond a reasonable doubt in a court of law. 

This is the second indictment brought against the head of a foreign exchange desk of a global financial institution related to the Criminal Division’s ongoing investigation of fraud and manipulation in the FX markets.

“Robert Bogucki and others allegedly not only betrayed his client’s confidences, but also risked undermining public trust in the foreign exchange options market,” says Acting Assistant Attorney General, John Cronan.  “The Criminal Division and our law enforcement partners remain committed to protecting American interests by investigating and prosecuting sophisticated schemes such as the one alleged in this indictment.”

“The indictment returned today charges a fraudulent manipulation scheme where the defendant betrayed Barclays’ client by lying and misusing the client information, and then masked the activities,” comments Inspector General Jay Lerner.  “We are pleased to work with our law enforcement partners in investigating these matters and protecting the integrity of the banking system against such alleged abuses.

Bogucki joined Barclays in 2008 as a managing director and co-head of the bank’s global macro-division, which encompassed rates, FX, commodities and offshore emerging markets.

Prior to that, Bogucki had a brief stint as a managing director and head of FX trading for the Americas at Lehman Brothers and spent over six years as managing director, head of FX sales and trading, Americas, at Merrill Lynch. Both of these positions were based in New York.

Before arriving at Merrill Lynch in 2002, Bogucki was vice president, co-head of European FX options trading, at Morgan Stanley in London for four years and worked as an associate for Goldman Sachs in Tokyo and Hong Kong for three years, where he was responsible for G10 FX options trading in Asia. 

This isn’t the first time in recent years that Barclays has found itself in hot water with US regulators for malpractice by staff

In May 2017, the Federal Reserve Bank of New York (Fed) imposed a $1.2 million fine and a permanent ban on employment in the banking industry against Barclays’ former global head of FX spot trading, Chris Ashton.

The fine and ban were in connection with the manipulation of FX pricing benchmarks, for which the Fed fined Barclays $342 million for in May 2015, citing unsafe and unsound practices related to its compliance and control failures concerning its practices in the FX markets.

Galen Stops

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