The Department of Justice has charged the former head of Barclays Capital’s New York foreign exchange trading operation in an indictment for his alleged role in a scheme to defraud a client of Barclays through a method commonly referred to as “front-running.”
The charges relate to the manipulation of foreign exchange options in advance of an exceptionally large trade by Hewlett-Packard Company (HP) in 2011. Robert Bogucki was charged in an indictment filed in the Northern District of California on Jan. 16, with one count of conspiracy to commit wire fraud and six counts of wire fraud. He will make his initial appearance on Jan. 17 before U.S. Magistrate Judge Cheryl Pollak of the Eastern District of New York.
According to the indictment, in September and October 2011, Bogucki misused information provided to him by HP, which had hired Barclays to execute a foreign exchange transaction related to the planned acquisition of a U.K.-based company. Barclays was selected to execute the foreign exchange transaction, which required the sale of six billion British pounds worth of options, in September 2011.
Bogucki and other Barclays employees assured HP and its employees that they understood the need to keep the planned transaction, which was exceptionally large, and therefore “market-moving,” confidential, according to the Justice Department. Instead, Bogucki and other Barclays employees allegedly used the confidential information they received to manipulate the price of “volatility,” a metric that affects the value of foreign exchange options. 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 also discussed “hammer[ing] the market lower” in order to decrease the value of the 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.
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 foreign exchange markets.