On Wednesday, it was announced that the former head of Barclays Capital Inc.’s New York foreign exchange trading operation had been charged for his alleged role in a scheme to defraud a client of Barclays using a method known as “front-running”. The charge is associated with the manipulation of foreign exchange options in advance of a significantly large trade by the Hewlett-Packard Company in 2011. 45-year-old Robert Bogucki of East Setauket, New York was charged with one count of conspiracy to commit wire fraud and six counts of wire fraud.
The indictment alleges that in September and October of 2011, the defendant misused information provided to him by HP. The company had hired Barclays to execute a foreign exchange transaction linked to the planned acquisition of a company based in the United Kingdom. Barclays was selected to execute the transaction, which involved the sale of 6 billion British pounds worth of options in September of 2011. The defendant and other Barclays employees told HP that they understood the importance of keeping the planned transaction confidential.
It is alleged that Bogucki and other Barclays employees used the confidential information to manipulate the price of “volatility”. During conversations with Bogucki, one Barclays trader claimed that he and others would “spank the market” to depress the price of volatility. The indictment claims that Bogucki made misrepresentations to HP and its employees. It also accuses Bogucki of directing options trading in a way that would depress the price of volatility to benefit Barclays at the expense of HP.
The charges are merely allegations. At this point in time, the defendant remains innocent until proven guilty beyond a reasonable doubt in a court of law. Additional details can be found here.