United States v. Johnson, 939 F.3d 82

Background

Cairn Energy engaged HSBC to execute up to $4 billion GBP/USD currency conversions and signed a Mandate Letter offering two methods: an hourly WM/Reuters Fixing Transaction (with ~2 hours’ notice) or a Full‑Risk Transfer (market rate + up to 100 pips).
HSBC’s Mark Johnson told Cairn’s adviser HSBC would “quietly” accumulate pounds and would not “ramp the fix,” and indicated HSBC would take only a small profit.
On December 7, 2011, Cairn requested a Fixing Transaction at the 3:00 p.m. fix for £2.25 billion; Johnson tipped traders and directed conduct that led an HSBC trader to aggressively buy pounds, moving the hourly fix upward.
The published 3:00 p.m. fix was 1.57185; HSBC later offered a small concession and ultimately profited about $7 million on the trade.
Johnson was indicted for conspiracy and wire fraud; the government advanced two theories: (1) misappropriation of confidential information (breach of duty) and (2) denial of Cairn’s right to control its assets by withholding information material to price/decisionmaking.
A jury convicted Johnson; on appeal the Second Circuit affirmed, concluding the evidence was sufficient under the right‑to‑control theory (so it did not decide the misappropriation theory). Johnson was sentenced to 24 months.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Sufficiency under right‑to‑control (wire fraud)	Johnson misrepresented how HSBC would trade and the expected price, depriving Cairn of information that could affect its economic decisions.	Cairn received the bargained-for economic benefit (the published fix) and the Mandate Letter did not forbid trading ahead; no intent to deprive Cairn of control.	Affirmed. A reasonable jury could find Johnson intended to deceive about price/process and that those misrepresentations were capable of influencing Cairn.
Sufficiency under misappropriation theory	Johnson misappropriated Cairn’s confidential information and breached a duty of trust to generate secret profits.	Insufficient evidence of the required duty or breach.	Not reached. Court affirmed on the right‑to‑control theory and did not decide this theory.
Materiality of specific misrepresentations	Statements that HSBC would not "ramp" the fix and post‑trade explanations (e.g., blaming the Russian Central Bank) were capable of influencing Cairn’s pre‑ and post‑trade decisions.	Any misstatements were immaterial because Cairn would have been worse off using Full‑Risk Transfer or could not unwind the completed trade.	Affirmed. The statements were material (capable of influencing) and could explain why Cairn chose the Fixing Transaction or did not immediately challenge the trade.
Due process / vagueness	The wire fraud statute applies where a defendant intentionally misrepresents how price will be determined; standard is clear.	Criminalizing trading ahead of a fix or related conduct was unforeseeable and standardless; deprived Johnson of fair notice.	Rejected. Conviction rested on misrepresentations about trading method/price determination, not on trading‑ahead per se; statute was not unconstitutionally vague as applied.

Key Cases Cited

United States v. Caltabiano, 871 F.3d 210 (2d Cir. 2017) (standard for reviewing sufficiency of the evidence)
United States v. Binday, 804 F.3d 558 (2d Cir. 2015) (right‑to‑control fraud can exist even if victim receives contractual benefit when deception concerns an essential element of the bargain)
United States v. Finazzo, 850 F.3d 94 (2d Cir. 2017) (distinguishing materiality from the requirement of contemplated tangible harm in right‑to‑control cases)
Neder v. United States, 527 U.S. 1 (1999) (materiality standard: a false statement is material if capable of influencing a decisionmaker)
United States v. Starr, 816 F.2d 94 (2d Cir. 1987) (fraud inquiry focuses on whether deception affected the nature of the bargain)
United States v. Regent Office Supply Co., 421 F.2d 1174 (2d Cir. 1970) (misrepresentations about price/quality can show harm or intent)