A former HSBC executive accused of foreign exchange market manipulation has been arrested and bailed in the UK ahead of a potential battle over his extradition to the US.
Stuart Scott, the bank’s former head of cash trading for Europe, the Middle East and Africa, appeared in a London court earlier this week and was bailed for £100,000.
It comes after Mr Scott and Mark Johnson, HSBC’s global head of foreign exchange cash trading, were accused by US authorities of rigging a $3.5bn currency market trade for oil and gas explorer Cairn Energy in December 2011.
Mr Johnson was dramatically arrested by the FBI as the Briton tried to board a flight from New York’s JFK airport last July but Mr Scott, who left HSBC in late 2014, has remained in the UK, where he lives.
US prosecutors have sought Mr Scott’s extradition and a hearing on the matter has been scheduled for July 31 at Westminster Magistrates’ Court. The 44-year-old is expected to fight the extradition request.
Mr Scott’s lawyer said: “Our client strongly denies the allegations.
“Given there are ongoing proceedings it would be inappropriate to comment further at this time.”
Mr Johnson was bailed and has pleaded not guilty to the charges.
Mark Johnson leaving court in Brooklyn after being granted bail last year
According to documents released by the US Justice Department last year, the pair are accused of “front-running”, whereby they used advance knowledge of the trade to convert $3.5bn to sterling to make a profit of $8m for HSBC and themselves.
When Cairn authorised the trade for £2.25bn – which was the equivalent of $3.5bn – Mr Johnson was recorded on a telephone call as saying to Mr Scott:“Ohhhh, f***king Christmas,” the documents allege.
An HSBC spokesman said: “Stuart Scott left the firm in 2014. We are unable to comment further on personnel issues or matters which are the subject of ongoing legal proceedings.”
The banking industry has been rocked by allegations that firms manipulated the $5 trillion-a-day global currency markets, a scandal that followed hot on the heels of the Libor-rigging revelations.
Seven banks paid out more than $10bn in total between 2014 and 2015 over claims they had misused information and rigged currency benchmarks.
Mr Scott’s arrest comes as HSBC faces further potential allegations of misconduct related to foreign exchange.
Currencies-focused investment firm ECU Group has applied to the commercial court requesting that the bank discloses documents relating to trades HSBC carried out for it 11 years ago. ECU believes the trades were rigged by HSBC.
Spokesmen for ECU and HSBC declined to comment.