Stephen Callahan has filed a whistleblower complaint alleging that HSBC engages in frequent front-running and that they fired him for his efforts to stop this illegal behavior. He seeks compensatory and punitive damages, reinstatement, recompense for reasonable attorney’s fees, and an injunction against future front-running.
As detailed in the complaint, prior to working at HSBC, Callahan had been working as a trader for various firms for almost thirty years. In 2021, the then managing director of HSBC, Joseph Leary, allegedly approached the plaintiff about heading up HSBC’s U.S. Rates trading desk. However, after Callahan received his offer but before he accepted it, Leary left HSBC to take a job at a different bank. Callahan asked if he could be a potential replacement for the role, and was told yes.
However, when Callahan started, the company had placed someone else in that position on an interim basis, ostensibly until he passed his licensing exams, for which his licenses had lapsed (his previous positions had not required them).
While working at HSBC he consistently noticed and remarked on instances of front running, the illegal practice of using clients’ purchasing decisions to make trades for the bank’s benefit before making the clients’ trades.
The complaint details that in 2018, HSBC paid more than $100 million in fines to resolve criminal allegations of a wide-reaching front-running scheme. As part of the deal, HSBC agreed to “enhance its compliance program” and, among other things, “terminat[e] the employment of employees involved in wrongdoing.” According to Stephen, his repeated calls to higher ups to crack down on this practice were rebuffed.
In November 2021, HSBC allegedly reneged on its promise to promote Callahan after he passed his licensing exams and hired someone else, allegedly because of his lobbying for a front-running crackdown. On March 7, HSBC suspended Callahan, according to the complaint, ostensibly because a client had requested information about five of his trades. His 2021 annual bonus was also put on hold. Despite the plaintiff’s repeated attempts to attain more information about his suspension and to provide more details on the trades in question, HSBC’s legal counsel kept him in the dark. On April 5, HSBC fired the plaintiff, according to court filings.
Callahan’s suit seeks reinstatement, including full fringe benefits and seniority rights, and lost wages; punitive damages; reimbursements for reasonable attorney’s fees; civil damages not to exceed $10,000; and an injunction to stop further front running.
The case was brought in the Southern District of New York, where the New York Stock Exchange is located, and Stephen is represented by Wigdor, LLP.
