The United States Commodity Futures Trading Commission (CFTC) has secured a Court order approving its request for international assistance in a case targeting former HSBC executive Christophe Rivoire, who is accused of manipulation and fraud in connection with swaps related to a bond issuance.

On May 11, 2021, Judge J. Paul Oetken of the New York Southern District Court signed an order granting the CFTC’s motion for issuance of request for international judicial assistance.

As FX News Group has reported, the CFTC seeks assistance from the French Ministry of Justice in obtaining document discovery and deposition testimony from Christophe Rivoire. This request is made pursuant to Chapter II of the Hague Convention.

Let’s recall that the CFTC brought charges against Rivoire back in December 2019. He was charged with engaging in a deceptive scheme to manipulate the pricing of an interest rate swap between a bond issuer and HSBC. Rivoire was employed as the Head of North American Rates in the New York office of HSBC.

The CFTC’s complaint alleges that in June and July 2012, Rivoire knew that a bond issuer had negotiated with the bank to price a bond issuance and a related swap using specific screens displaying prices from an interdealer broker firm, including prices for U.S. dollar interest rate basis swaps with a five-year maturity. Rivoire knew that the swap would be more profitable to the bank if lower prices for five-year basis swaps were displayed on the broker screens during the pricing of the bond issuance and the swap.

As further alleged, to effectuate the scheme to maximize the bank’s profit at the issuer’s expense by manipulating the prices of five-year basis swaps, Rivoire enlisted a trader under his supervision and explicitly directed the trader to “push the screen as much as we can before the pricing” of the swap with the issuer. This meant trading in a manner that would result in a lower price for five-year basis swaps.

The complaint alleges that the trader followed Rivoire’s direction. As a result of Rivoire’s direction, the trader also enlisted the help of a broker at the interdealer broker firm, including telling the broker in advance that the trader needed to move prices on the screens. During the pricing of the swap, Rivoire directed the trader when to sell a large quantity of swaps to manipulate the prices on the broker screens.

Without disclosing his directions to the trader or their conduct prior to the final pricing of the swap, Rivoire falsely or misleadingly told the issuer, “Obviously we are not controlling the screen.” The complaint alleges that the scheme had the effect of moving prices on the broker screens and, because the manipulated prices were used to price the swap, it resulted in a more profitable transaction for the bank and a less profitable transaction for the issuer. This conduct deceived the bond issuer and other market participants.

This is a civil matter that has been brought before a federal trial court, the United States District Court for the Southern District of New York, which has jurisdiction over this civil litigation. The CFTC seeks an order from the Court requiring Mr. Rivoire to pay civil monetary penalties, to disgorge all benefits received, and to make restitution to the Issuer in the amount the Issuer was harmed.

Mr. Rivoire has filed an answer denying the allegations set forth in the complaint.

The CFTC now intends to depose Mr. Rivoire relating to the allegations in the Complaint.

The regulator seeks certain documents, in relevant part:

• All documents or communications concerning the bond issuance and issuer swap referred to in the Complaint or the conduct and events alleged in the Complaint.
• All documents or communications concerning the CFTC’s investigation of swaps trading relating to bond issuances, including the bond issuance and issuer swap referred to in the Complaint (the “Investigation”).
• All documents or communications concerning any investigation or inquiry by HSBC of swaps trading relating to bond issuances, including the bond issuance and issuer swap referred to in the Complaint.
• All documents relating to Mr. Rivoire’s departure from HSBC, including but not limited to all agreements concerning indemnification or payment of attorney’s fees or other expenses related to this litigation or the Investigation.
• All documents and communications in Mr. Rivoire’s possession, custody, or control that he may use to support his defense of the Commission’s claims.

The suggested date by which any document discovery must be completed is 60 days from the Ministère de la Justice’s approval of the Court’s Request.