Two recent prosecutions in the foreign exchange (F/X) market raise questions about the use of general criminal statutes to regulate a trading practice that Congress, specialized regulators, and market rules have declined to prohibit. The conduct at issue is what bankers call pre-positioning, and what the government pejoratively labels “trading ahead” or “front running.” In both cases, the context was a complex, multi-billion dollar F/X trade between a bank and a major corporation that had the benefit of sophisticated advice and was well able to negotiate different trading terms if it was willing to pay for them.

One such prosecution, United States v. Johnson, resulted in a conviction following a four-week trial in the fall of 2017 that is currently on appeal before the U.S. Court of Appeals for the Second Circuit. Another, United States v. Bogucki, tried before the U.S. District Court for the Northern District of California this past February, resulted in the dismissal of all charges at the close of the government’s case.

‘United States v. Johnson’

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