Thursday 21 July 2016 11:52 am

Cairn Energy at centre of HSBC rate-rigging allegations

Cairn Energy is the client at the centre of a US investigation into rate-rigging, currency fixing and market manipulation, City A.M understands.

US prosecutors allege two senior HSBC employees artificially boosted sterling ahead of a $3.5bn deal (£2.7bn in today's prices), netting the bank around $8m in profit.

Bloomberg reported that the oil explorer had hired HSBC in 2011 to convert the sales proceeds of a stake in its Indian subsidiary to another London-listed firm, miner Vedanta Resources, from dollars to sterling.

Read more: HSBC currency traders charged in New York in US rate-rigging investigation

But two senior HSBC employees profited by buying pounds ahead of the transaction, and instructing colleagues to do the same, knowing that the exchange rate would spike once it had been processed.

When an adviser to Cairn subsequently challenged the pound's movement, they were wrongly told by a HSBC employee that sterling's increase was due to trading by a Russian bank.

Cairn and HSBC declined to comment.

Mark Johnson, HSBC's London-based global head of foreign exchange, and Stuart Scott, its ex-head of cash trading for Europe, the Middle East and Africa, were charged in a criminal complaint field in federal court in Brooklyn for "conspiring to defraud a client."

Read more: Cairn and Genel sheltered from oil prices due to cash balances

US prosecutors allege the pair "placed personal and company profits ahead of their duties of trust and confidentiality owed to their client".

They then "wove a web of lies" when confronted by their client, which was "designed to conceal the truth and divert attention away from their fraudulent trades."

The charges are the first in the US Justice Department's three-year investigation into foreign currency rigging.