The former head of Barclays Capital Inc.’s (Barclays) New
York foreign exchange trading operation was charged yesterday 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 the Palo Alto, California-based
Hewlett-Packard Company (HP) in 2011.
Acting Assistant Attorney General John P. Cronan of the
Justice Department’s Criminal Division, Acting U.S. Attorney Alex G. Tse of the
Northern District of California and Inspector General Jay N. Lerner of the
Federal Deposit Insurance Corporation (FDIC) made the announcement.
Robert Bogucki, 45, of East Setauket, New York, 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. Bogucki will make his initial appearance on
Wednesday, Jan. 17, at 2:00pm in Brooklyn, New York, before U.S. Magistrate
Judge Cheryl L. Pollak of the Eastern District of New York.
“Robert Bogucki and others allegedly not only betrayed his
client’s confidences, but also risked undermining public trust in the foreign
exchange options market,” said Acting Assistant Attorney General Cronan. “The Criminal Division and our law
enforcement partners remain committed to protecting American interests by
investigating and prosecuting sophisticated schemes such as the one alleged in
this indictment.”
“The indictment
returned today charges a fraudulent manipulation scheme where the defendant
betrayed Barclays’ client by lying and misusing the client information, and
then masked the activities,” said Inspector General Lerner. “We are pleased to work with our law
enforcement partners in investigating these matters and protecting the
integrity of the banking system against such alleged abuses.”
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
UK-based company. Barclays was selected
to execute the foreign exchange transaction – which required the sale of 6
billion British pounds worth of options – in September 2011. The defendant 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. 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.
The investigation is being conducted by the FDIC’s Office of
Inspector General. Assistant Chief Brian
Young and Trial Attorney Justin Weitz of the Criminal Division’s Fraud Section
are prosecuting the case. The U.S. Attorney’s
Office for the Northern District of California provided substantial assistance
in this matter.
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