HSBC is facing potential legal action after a UK High Court judge ordered it to hand over trading records requested by one of its former clients ECU Group.
Although it initially was persuaded by HSBC to drop its complaint, ECU Group renewed its claim against the bank over stop loss orders executed in 2006 following the US Department of Justice bringing charges of wire fraud, including front running, relating to a deal HSBC executed on behalf of Cairn Energy and led by former global head of cash FX spot trading, Mark Johnson, and European head of spot FX cash trading Stuart Scott.
Reports say HSBC conducted an internal inquiry into the matter before reassuring ECU that nothing was untoward, however the bank also conducted a similar inquiry into the activities of its trading desk around the Cairn Energy deal, and as such ECU decided to request the documents as a first step towards potential legal action.
Johnson was found guilty of nine of 10 charges of wire fraud by a New York court last month, while Scott lost his bid against extradition to the US to face similar charges.
ECU Group’s case was heard at the end of October in London and late last week the judge ruled in the currency management company’s favour. Sources familiar with the matter tell Profit & Loss that the trade logs relate to three stop loss orders of around EUR 100 million each and on each occasion the market started moving in the direction of the order within minutes of it being placed.