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Citi made US$35m ahead of client's M&A deal, former FX trader tells court

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Senior Citigroup bankers put the interests of the US bank ahead of clients, trading on insider information ahead of a major M&A deal five years ago, one of its former foreign exchange traders told a London court on Wednesday.

[LONDON] Senior Citigroup bankers put the interests of the US bank ahead of clients, trading on insider information ahead of a major M&A deal five years ago, one of its former foreign exchange traders told a London court on Wednesday.

Perry Stimpson, a former Citigroup forex trader who is claiming unfair dismissal, said the bank was handling a big M&A deal in 2010 and made millions trading foreign exchange ahead of it - a practice called "front running" - in direct contravention of its code of conduct.

Citigroup's lawyer Diya Sen Gupta told the court on Thursday: "The allegations were investigated and are not, and were not, substantiated."

Mr Stimpson, who is representing himself at the hearing at an employment tribunal, said the deal had a foreign currency element that was handled by Jeff Feig, who was global head of trading at the time, and Anil Prasad, who was head of foreign exchange.

Mr Stimpson said Citigroup bought cash and options that pushed the sterling rate higher in advance of the transaction, which allowed the bank to net US$35 million profit.

Feig declined to comment when contacted by Reuters.

Mr Prasad's lawyers, Stephenson Harwood, said: "These allegations are baseless and are emphatically denied." It said neither it, nor Mr Prasad, would comment further.

The Citigroup lawyer said neither Mr Feig more Mr Prasad were found to have committed misconduct, and both left the bank for personal reasons unrelated to the FX investigation.

Citigroup said all the allegations of misconduct by others made by Mr Stimpson in his disciplinary proceedings were forwarded to compliance. It said if misconduct was proven against existing employees then disciplinary action was taken.

Mr Feig, who was employed by Citigroup in the United States and still lives there, resigned in May 2014, and Mr Prasad left the previous month, both before Mr Stimpson made allegations against them.

Mr Stimpson said he was using the example of Mr Feig and Mr Prasad's activities to ask the bank's witnesses in court why he was singled out for breaches of the bank's code when senior staff were not. He said he told the bank about the misconduct and other examples at a disciplinary hearing in June 2014.

Citi has said Mr Stimpson was dismissed for serious breaches of contract, alleging he shared confidential client information with traders at other banks via electronic chatrooms.

Mr Stimpson, a forex trader at Citigroup in London for 25 years, was dismissed last November in the wake of an industry scandal that resulted in banks paying more than US$10 billion in fines for failing to stop traders manipulating the forex market.

Mr Stimpson said Citigroup staff breached confidentiality around some clients, especially central banks.

"It was the culture to talk about central bank activity," he said.

Citi has said it had concerns that Mr Stimpson breached client confidentiality on at least 12 occasions in chatroom conversations. But Mr Stimpson said discussion of central bank activity was "endemic" in the industry, and the transcripts of those 12 conversations show that two central banks were mentioned 38 times by nine different participants.

He asked Jerome Kemp, Citi's global head of futures who was involved in Mr Stimpson's disciplinary process, whether the rules on client confidentiality "could be bent at the direction of senior management."

Mr Kemp said they could not, and denied there were different standards for central bank clients. "I believe every one of our clients has the right to expect the information they share with us ... is protected by confidentiality. There would be no carve out in respect to a central bank or any other client," Mr Kemp said.

The hearing will last for at least the rest of this week, and Mr Stimpson is expected to testify and bring his own witnesses on Friday.

REUTERS