IFR Magazine – January 20, 2018

International Financing Review January 20 2018 19

People

&Markets

Into frying pan? DoJ charges Barclays FX trader

4HEû53û$EPARTMENTûOFûUSTICEûHASûCHARGEDû
THEûFORMERûHEADûOFûBARCLAYSû.EWû9ORKû
FOREIGNûEXCHANGEûOPERATIONûOVERûHISû
ALLEGEDûROLEûINûAûSCHEMEûTOûDEFRAUDûAûCLIENTû
OFûTHEûBANK ûTHEû$OûSAID
2OBERTû"OGUCKI ûANû!MERICANûCITIZEN ûISû
ALLEGEDûTOûHAVEûMANIPULATEDûFOREXûOPTIONSû
BEFOREûAûLARGEûTRADEûBYûCOMPUTERûANDû
SOFTWAREûMAKERû(EWLETT
0ACKARDûINû û
USINGûAûPRACTICEûKNOWNûASûhFRONT
RUNNINGv
4HEûINDICTMENTûADDSûTOûAûLISTûOFûALLEGEDû
MISCONDUCTûATûMAJORûBANKSûRELATEDûTOû
BENCHMARKSûANDû&8ûTRADINGûHSBC on
4HURSDAYûAGREEDûTOûPAYû53MûRELATEDû
TOûHISTORICû&8ûTRADINGûACTIVITIES ûINVOLVINGûAû
53MûlNEûANDû53MûINû
RESTITUTIONûRELATEDûTOûMISCONDUCTûINûû
ANDû
(3"#ûALSOûENTEREDûINTOûAûTHREE
YEARû
DEFERREDûPROSECUTIONûAGREEMENTûWITHûTHEû
$OûOVERûTHEûMISCONDUCTû4HEû$OûSAIDûTHEû
BANKSûCOMPLIANCEûANDûCONTROLSûHADû
IMPROVEDûSINCEûTHEûMISCONDUCTûOCCURRED
)Nû/CTOBER ûAûJURYûFOUNDûFORMERû(3"#û
EXECUTIVEû-ARKû*OHNSONûGUILTYûOFû
DEFRAUDINGû#AIRNû%NERGYûINûAû53BNû
CURRENCYûTRADEûINû

M&A DEAL
4HEûINDICTMENTûAGAINSTû"ARCLAYSû"OGUCKIû
ALLEGESûHEûMISUSEDûINFORMATIONûPROVIDEDû
TOûHIMûBYû(0ûBEFOREûTHEûCOMPANYSû
PLANNEDû53BNûACQUISITIONûOFû"RITISHû
SOFTWAREûCOMPANYû!UTONOMY
(0ûHIREDû"ARCLAYSûTOûEXECUTEûaBNû
53BN ûWORTHûOFû53ûDOLLAR
STERLINGû&8û
OPTIONSûASûPARTûOFûTHATûDEALû"OGUCKIûISû
ALLEGEDûTOûHAVEûMADEûTRADESûAHEADûOFûTHEû

DEALûTHATûLEDû(0ûTOûLOSEûMILLIONSûOFûDOLLARSû

ANDûENABLEDû"ARCLAYSûTOûMAKEûMILLIONSûOFû

DOLLARS

4HEûINDICTMENTûSAIDûMOREûTHANûûOFû

"OGUCKISûûCOMPENSATIONûWASûFROMû

BONUSESûFORûPERFORMANCE

h2OBERTû"OGUCKIûANDûOTHERSûALLEGEDLYû

NOTûONLYûBETRAYEDûHISûCLIENTSûCONlDENCESû

BUTûALSOûRISKEDûUNDERMININGûPUBLICûTRUSTûINû

THEûFOREIGNûEXCHANGEûOPTIONSûMARKETvû$O*û

ACTINGûASSISTANTûATTORNEYûGENERALû*OHNû

#RONANûSAID

4HEû$O*ûSAIDûINSTEADûOFûKEEPINGûDETAILSû

OFû(0SûLARGEûTRADEûCONlDENTIALûHEûANDû

OTHERû"ARCLAYSûEMPLOYEESûALLEGEDLYûUSEDû

THEûINFORMATIONûTOûMANIPULATEûTHEûPRICEûOFû

VOLATILITYûWHICHûAFFECTSûTHEûVALUEûOFû&8û

OPTIONSû(EûISûALLEGEDûTOûHAVEûDIRECTEDû

OPTIONSûTRADINGûTOûDEPRESSûTHEûPRICEûOFû

VOLATILITYûTOûTHEûBENElTûOFû"ARCLAYSûANDûATû

(0SûEXPENSE

BE DISCREET

$URINGûCONVERSATIONSûWITHû"OGUCKIûONEû

"ARCLAYSûTRADERûSTATEDûTHATûHEûANDûOTHERû

TRADERSûWOULDûhBASHûTHEûSHITûOUTûOFvûANDû

hSPANKûTHEûMARKETvûTOûDEPRESSûTHEûPRICEûOFû

VOLATILITYûTHEû$O*ûSAID

)TûSAIDûOTHERû"ARCLAYSûTRADERSûALSOû

DISCUSSEDûhHAMMER;ING=ûTHEûMARKETûLOWERvû

INûORDERûTOûDECREASEûTHEûVALUEûOFûTHEû(0û

OPTIONS

4HEûINDICTMENTûSAIDû(0ûWASûEVENû

ADVISEDûTOûDELAYûTHEûSALEûOFûITSûOPTIONSûTOû

PROVIDEûTHEûTRADERSûADDITIONALûTIMEûTOû

MANIPULATEûTHEûMARKETûINû"ARCLAYSûFAVOUR

"OGUCKIûûWASûCHARGEDûINûANû

INDICTMENTûlLEDûINû#ALIFORNIAûWITHûONEû

COUNTûOFûCONSPIRACYûTOûCOMMITûWIREûFRAUDû

ANDûSIXûCOUNTSûOFûWIREûFRAUDû(EûPLEADEDû

NOTûGUILTYûINû"ROOKLYNûFEDERALûCOURTûONû

7EDNESDAYûANDûWASûRELEASEDûONûBAILû4HEû

CASEûWILLûPROCEEDûINû#ALIFORNIAûFEDERALû

COURT

"OGUCKISûLAWYERû3EANû(ECKERûSAIDûHISû

CLIENTûWASûINNOCENT

h(EûTRIEDûHARDûTOûDOûRIGHTûBYû(0ûWHILEû

FOLLOWINGûTHEûRULESûTHATûGOVERNEDûMARKET

MAKERSûINûFOREIGNûEXCHANGEûFORûMANYû

YEARSû4HISûACTIONûISûNOTHINGûMOREûTHANûANû

UNFAIRûANDûMISGUIDEDûATTEMPTûTOûREWRITEû

THOSEûLONG

STANDINGûRULESvû(ECKERûSAID

!û"ARCLAYSûSPOKESWOMANûSAIDûTHEûBANKû

HADûBEENûCO

OPERATINGûWITHûTHEû$O*ûANDû

THEûINCIDENTûINVOLVEDûAûSINGLEûTRANSACTIONû

THATûPRE

DATEDûEXTENSIVEûIMPROVEMENTSûTOû

ITSûCONDUCTûANDûCONTROLSûPROCEDURES

"OGUCKIûISûSTILLûEMPLOYEDûBYû"ARCLAYSûBUTû

HASûBEENûONûLEAVEûSINCEû.OVEMBERûû

WHENûTHEûISSUEûWASûIDENTIlEDûBYûTHEûBANKû

ASûPARTûOFûANûINTERNALûINVESTIGATIONû(Eû

WORKEDûATû"ARCLAYSûFROMû

4HEûINDICTMENTûSAIDû"OGUCKIûHADû

CAUTIONEDûAû"ARCLAYSûTRADERûTOûBEûDISCREETû

WITHûTHEûTRADESûTOûAVOIDûTHEûATTENTIONûOFû

SENIORûEXECUTIVESûATûTHEûBANK

v)FûITûGETSûBACKûTOû(0ûBYûSOMEûLOOSE

LIPPEDûMARKETûMONGERûTHATûWEREûSELLINGû

CABLEûOFFûOFûTHEMûORûWEREûGETTINGûOUTûOFûAû

SIX

YARDûOPTIONû;IEûAûaBNûOPTION=ûOVERûTHEû

COURSEûOFûAûWEEKûITûWILLûGOûSTRAIGHTûTOû;THEû

HEADûOFû"ARCLAYSû53ûOPERATIONS=ûANDûYOURû

ASSûWILLûBEûINûAûFUCKINGûFRYINGûPANûINû

.OVEMBERvûTHEûINDICTMENTûQUOTEDûHIMûASû

SAYING

Steve Slaterû"RENDANû0IERSON

China fines issuer for bond fraud

!û#HINESEûCOMPANYûTHATûDEFAULTEDûONûTWOû
ONSHOREûBONDSûINû!UGUSTû ûFACESûAûlNEû
OFû2MBMû53M ûFORûFRAUDûRELATEDû
TOûTHEûDEBTûOFFERINGS
4HEû#HINAû3ECURITIESû2EGULATORYû
#OMMISSIONûFOUNDûTHATûPRIVATELYûOWNEDû
WUYANG CONSTRUCTION GROUPûFAKEDûRECEIVABLESû
ANDûSETûASIDEûINSUFlCIENTûPROVISIONSûINûORDERû
TOûMEETûTHEûlNANCIALûREQUIREMENTSûTOû
CONDUCTûTHEûTWOûPUBLICûOFFERINGSûOFûNOTESûINû
ûFORûAûCOMBINEDû2MBBN ûACCORDINGû
TOûAûlLINGûONûTHEû3HANGHAIû3TOCKû%XCHANGE
4EBONû3ECURITIES ûTHEûUNDERWRITERûOFûTHEû
TWOûNOTES ûSUBMITTEDûTHEûlLINGûLASTûWEEK
4HEû#32#ûREQUIRESûTHAT ûFORûANYûPUBLICû
OFFERINGûOFûBONDSûINûTHEûSTOCKûEXCHANGEû

MARKETûTHEûAVERAGEûDISTRIBUTABLEûPROlTSûOFû

ISSUERSûINûTHEûPRECEDINGûTHREEûYEARSûBEû

ENOUGHûTOûCOVERûONEûYEARûOFûINTERESTûFORû

THEûBONDSûBEINGûSOLD

4HEû#32#ûALSOûFOUNDûTHATûTHEûCOMPANYû

USEDûTHEûFALSEûlNANCIALûREPORTSûFORûTWOû

PRIVATEûPLACEMENTSûOFûBONDSûWITHûTOTALû

PRINCIPALûAMOUNTûOFû2MBMûINû

$ECEMBERûûANDû!PRILû

)Nû!UGUSTûû7UYANGû#ONSTRUCTIONû

FAILEDûTOûREDEEMûAû2MBMûTHREE

YEARû

NON

PUTûTWOûBONDûWHENûINVESTORSû

REGISTEREDû2MBMûOFûTHEûNOTESûFORû

REDEMPTIONûWHICHûALSOûTRIGGEREDûAûCROSS

DEFAULTûONûANOTHERû2MBMûOFûNOTESûOFû

THEûCOMPANY

!CCORDINGûTOûAûREPORTûINûTHEûOFlCIALû

3HANGHAIû3ECURITIESû.EWSûRETAILûINVESTORSû

HELDûûANDûûOFûTHEûTWOûNOTESû

RESPECTIVELY

4HEû#32#ûIMPOSEDûAûlNEûOFû2MBMû

ONû7UYANGû#ONSTRUCTIONûANDûlNESûRANGINGû

FROMû2MBûTOû2MBûONûû

PEOPLEûINVOLVEDûINûTHEûFRAUDûINCLUDINGû

#HENû:HIZHANGûTHEûCHAIRMANûOFûTHEû

COMPANYûACCORDINGûTOûTHEûlLING

4HEûREGULATORûHASûSTEPPEDûUPûEFFORTSû

TOûCLEANûUPûTHEûEXCHANGE

TRADEDûBONDû

MARKETûUNDERûITSûSUPERVISIONûWHICHûHASû

EXPANDEDûûTIMESûINûVOLUMEûINûTHEûPASTû

TWOûYEARS

Ina Zhou

International Financing Review January 20 2018 19

0EOPLE

-ARKETS