On March 4, a federal judge of the Northern District of California granted a directed verdict motion in favor of Robert Bogucki, the former head of Barclays’ foreign exchange (“FX”) trading desk.  Bogucki went to trial on charges that he had engaged in a “front-running” scheme to manipulate the FX options market in advance of a client’s corporate transaction.  Following the government’s presentation of its case at trial, Judge Charles Breyer acquitted Bogucki, finding that the government had failed to present sufficient evidence such that a reasonable jury could find Bogucki guilty of any fraud charges beyond a reasonable doubt.

In his decision, Judge Breyer slammed the government’s case, finding that it had not shown that Bogucki’s conduct violated a “clear rule or regulation,” or that it was prohibited by any agreement between Barclays and its client. [1]  Additionally, he found that Bogucki’s conduct was consistent with the client’s understanding of their arms-length relationship with Barclays.  Judge Breyer concluded that the case could not go to the jury.

This decision, which comes in the wake of other FX traders’ acquittal following a jury trial last fall, may cause the Department of Justice’s (“DOJ’s”) Fraud Section to reconsider bringing criminal prosecutions arising from business practices in principal to principal marketplaces between sophisticated counterparties in previously unregulated areas like the FX market.


In January 2018, Bogucki was indicted on allegations that he had engaged in “front-running,” a trading practice where traders place orders on behalf of their firms in advance of an anticipated client transaction.[2] The DOJ accused Bogucki of misusing his knowledge of an upcoming large trade by one of Barclays’ corporate clients, Hewlett-Packard (“HP”), to make millions of dollars for the bank.

According to the indictment, in 2011, HP hired Barclays to execute a complex FX options transaction in connection with HP’s anticipated acquisition of Autonomy, a UK-based software company.[3]  In consultation with Barclays, HP agreed to purchase 6 billion British pounds worth of cable options from Barclays, to ensure that HP had access to sufficient British pounds to make the acquisition.  HP later decided it no longer needed the options to fund its acquisition, and decided to “unwind” them by selling them back to the FX market incrementally.

However, the indictment alleges that Bogucki conspired to manipulate the price of “volatility,” a metric that affects the value of FX options.[4]  Specifically, over the course of about a week and a half in September and October 2011, Bogucki sold FX options to ensure that Barclays maintained a “short” position, and by doing so, depressed the value of HP’s options.  During this time, Barclays FX traders were purchasing HP’s cable options as part of HP’s unwind.

As part of the alleged scheme, the government claimed that Bogucki made misrepresentations to HP and its employees about the state of the options market.  When asked about the decline in the price of volatility by HP representatives, Bogucki claimed that it was caused by the stock market and other banks’ activities.[5]  He did not disclose that Barclays had been selling other options, which had the effect of depressing the price of volatility.

As a result of this scheme, HP allegedly lost millions of dollars in the value of the cable options it had purchased from Barclays, and Barclays in turn made millions of dollars by acquiring the options from HP at a discounted price.

Trial and Judge Breyer’s Decision

Last month, Bogucki’s criminal trial began in the Northern District of California, where the government presented to the jury communications between Bogucki and other traders that it claimed demonstrated a conspiracy to manipulate the FX options market.  On February 28, after the government rested its case, Bogucki’s counsel moved for relief under Federal Rule of Criminal Procedure 29 for a directed verdict.

In his decision on Bogucki’s motion, Judge Breyer found that the government had failed to show that Bogucki had made material misstatements or omissions to HP, a required element of wire fraud.  Judge Breyer found that there was no expectation of full disclosure between HP and Barclays, given the relationship between the parties, industry practice, and the underlying agreement governing the transaction.[6]

Judge Breyer found it significant that HP and Barclays had entered into an International Swap Dealers Association agreement (an “ISDA” agreement), which banks often use in various kinds of FX transactions.  Judge Breyer viewed the ISDA agreement as establishing that both parties were “engaged as principals at opposite sides of an arm’s-length transaction,” rather than parties in an fiduciary or agency relationship.[7]

The decision also discusses the practice of “pre-positioning” or “hedging”, where a bank takes a hedge position in anticipation of taking on an asset.[8]  Judge Breyer emphasized that at the time of the HP transaction, there were no rules or regulations other than bank internal policies and relationship-specific agreements that governed pre-positioning in FX options trading.  He noted further that at least some types of pre-positioning are expected, and considered permissible.

After presenting this backdrop, Judge Breyer rejected both of the government’s theories of Bogucki’s guilt: (1) that Bogucki misappropriated HP’s confidential information in violation of a duty of trust and confidence, or (2) that he deprived HP of its property through material misrepresentations and half-truths.  With respect to the first theory, the Court was “unpersuaded” that a reasonable jury could find that Bogucki had a duty of trust and confidence to HP.[9]  Judge Breyer wrote: “[t]here is nothing in the record to suggest that the mere fact that HP shared information with Barclays was sufficient to create such a duty.”[10]  He pointed to a significant distinction between the parties’ relationship in Bogucki’s case and that at issue in the previous criminal trial and conviction of HSBC FX trader Mark Johnson, where HSBC and its client had entered into several written agreements, including a non-disclosure agreement.[11]  Judge Breyer noted that Barclays and HP had only signed an ISDA, which indicated that no “fiduciary-like relationship” existed between them.[12]

Judge Breyer also rejected the DOJ’s second theory, which relied on communications between Bogucki and HP to demonstrate that Bogucki had allegedly made material misrepresentations and told “half-truths” to HP.  Judge Breyer reviewed certain chat transcripts, phone calls, and presentations sent by Barclays to HP, and concluded that none of these communications could sustain a jury finding that Bogucki’s false statements or omissions were capable of influencing HP to part with money or property.[13]

Notably, Judge Breyer found it significant that an HP employee had given testimony that he himself had engaged in “bluffing” and “BS-ing” Barclays, and had indicated that he believed that Bogucki was likewise not being fully honest with him.[14]  He also found that neither of the presentations identified by the government were materially misleading, noting that one of them indeed alerted HP to the possibility that banks such as Barclays could be “aggressive” in the market.[15]  Additionally, he observed that HP had expected Barclays to be engaged in some trading during the time in which it was purchasing HP’s options, and had not put any limits on Barclays’ trading.[16]  Judge Breyer found that this demonstrated the parties’ expectations, and accordingly whether false statements could have influenced HP’s decision-making.  For similar reasons, Judge Breyer rejected the DOJ’s argument that the parties’ entire course of dealing and the communications in their totality could have induced HP to part with money or property.[17]

Judge Breyer concluded that none of the DOJ’s evidence satisfied the materiality requirement for the charges of wire fraud.


This decision, when read in conjunction with several other criminal cases from the past year, may have broader implications for both pending and future market manipulation criminal cases in previously unregulated markets.

  • Judge Breyer’s decision is one of several recent cases that may give the DOJ cause to rethink their strategies on prosecuting cases related to business practices in the FX market and other unregulated industries. Last fall, a jury acquitted former FX traders at Citigroup, Barclays, UBS, and RBS, who were tried on charges that they had coordinated to manipulate the FX market.  Additionally, last July the government voluntarily dismissed its long-running case against Jesse Litvak, a former trader at Jefferies & Co. who was criminally charged with multiple counts of securities fraud and other fraud charges in connection with the Troubled Asset Relief Program.[18]  While two juries convicted Litvak, both convictions were overturned by the Second Circuit, and the government ultimately chose to forego a third trial.[19]  As with the prosecution of Bogucki, the government struggled to prove the materiality of alleged misstatements in arms-length transactions between sophisticated parties.  The SEC soon came to a similar decision and dismissed its charges against Litvak as well.
  • Additionally, Judge Breyer’s decision may impact the DOJ’s prosecution of other pending market manipulation cases. Bogucki was the second trader to be tried on charges of front-running in the FX markets.  Last year, former HSBC trader Mark Johnson was convicted on similar charges of having misled a client in a FX transaction.  Johnson has appealed his conviction to the Second Circuit, where he has made arguments similar to those that persuaded Judge Breyer in this week’s decision.[20]  It remains to be seen whether the Second Circuit will similarly find that while an ISDA agreement may not be sufficient to establish a fiduciary relationship with a client, a written agreement, such as a non-disclosure agreement, may establish more significant expectations and obligations between a bank and its clients.
  • Judge Breyer’s decision also focused on the relationship between Barclays and HP, and took the parties at their word that they were operating at “arms-length.” In particular, Judge Breyer found it significant that an HP employee had testified to HP’s own dishonesty, and to their expectations of Barclays’ dishonesty.  Judge Breyer took this testimony to indicate that HP viewed Barclays as more akin to a competitor in the market than a fiduciary or agent.
  • Importantly, Judge Breyer’s decision alludes to the due process concerns inherent to prosecutions of participants in an unregulated industry like the FX market.  In his ruling, Judge Breyer emphasizes that there are no “rules or regulations” governing pre-hedging, and that Bogucki should not be held criminally responsible for conduct that he did not know was a crime.

[1] Order Granting Defendant’s Rule 29 Motion, United States. v. Bogucki, No. 18 Cr. 21 (CRB) (N.D. Cal. Mar. 4, 2019) (the “Bogucki Order”).

[2] Indictment, Bogucki, No. 18 Cr. 21 (N.D. Cal. Jan. 16, 2018).  The initial indictment was later superseded by a subsequent indictment.  See Superseding Indictment, Bogucki, (Mar. 27, 2018) (“Superseding Indictment”).

[3] Superseding Indictment at 4-5.

[4] Id. at 6-7.

[5] Id. at 8-9.

[6] Bogucki Order at 11-12.

[7] Id.at 3-4.

[8] Id. at 4-5.

[9] Id. at 5.

[10] Id.

[11] Id. at 6 (discussing United States. v. Johnson, No. 16 Cr. 457 (NGG), 2017 WL 5125770, at *3-4 (E.D.N.Y. Sept. 21, 2017)).

[12] Id. at 6.

[13] Id. at 7-10.

[14] Id. at 7.

[15] Id. at 9-10.

[16] Id. at 10.

[17] Id. at 11.

[18] Government’s Motion to Dismiss Count Four, United States v. Litvak, No. 13 Cr. 19 (JCH) (D. Conn. July 30, 2018).

[19] For a fuller discussion of this case, see Two Strikes and You’re Out: The Litvak Saga Comes to an End, Cleary Enforcement Watch (Aug. 9, 2018), https://www.clearyenforcementwatch.com/2018/08/two-strikes-youre-litvak-saga-comes-end/.

[20] Brief for Appellant-Defendant, United States v. Johnson, No. 18-1503 (2d Cir. Aug. 30, 2018).