The “rotten culture” has permeated HSBC forex, the High Court hearing process

A “rotten culture” permeated HSBC’s exchange-traded bank between 2004 and 2006, with bankers abusing confidential information to “deal” with customer orders, it was claimed. the UK High Court on Monday.

The allegations were made at the start of a seven-week trial in which currency manager ECU Group accused HSBC of fraud and misconduct in connection with 52 forex exchanges it made with the bank during that period. HSBC rejects and claims for several reasons.

The case threatens to reopen old wounds in the $ 6.6 billion-a-day currency market, which was shaken by accusations in 2013 that a number of world banks had systematically manipulated currency prices. for years. HSBC paid $ 343 million in fines and restitution to the Financial Conduct Authority and also $ 276.5 million to the U.S. Federal Reserve for failures in its supervision of FX trading between 2008 and 2013.

ECU, which was an HSBC client, alleges misconduct by HSBC traders in the process including front-running – trading with confidential knowledge of an upcoming client order. He also alleges that HBPB, HSBC’s private bank, engages in “pip theft” where it has added secret or marked “pip” to the execution prices reported to the ECU to ensure an illegal profit.

The ECU first complained to HSBC about unusual movements in FX prices in February 2006 but was told, after an internal HSBC probe, that there was no evidence of malfunction.

The ECU began reviewing trades again after 2016, when the U.S. Department of Justice released a formal indictment against two former HSBC FX traders in connection with alleged front-running charges at a another HSBC customer – Cairn Energy.

On Monday Richard Lissack QC, an attorney for the ECU, told the Supreme Court that the case concerned a “shameful episode” in HSBC’s history.

“The ECU’s case is that HSBC’s foreign exchange trading bank between 2004 and 2006 was brand new. Traders have treated clients ’orders as an opportunity to get rich,” Lissack said.

In his written arguments, Lissack said HSBC traders saw ECU trades as an “easy target”.

HSBC will open its case Tuesday. In its written statements, the bank said that “incredibly rancid allegations are all statute-barred” because the alleged events took place more than 15 years ago and described the ECU process as a “fagot of fabricated claims and legally inconsistent “.

“ECU is now engaged in a cynical and opportunistic attempt to resurrect these stagnant claims, which it could and should have pursued, if at all, in 2006,” he says.

“The relevant orders have not been handled before and, except for a few isolated incidents, the HSBC Parties have not committed the alleged ECU error,” he said in the written arguments, adding that he denied that there had been any fraud or deliberate concealment in the case. The case continues.

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