Front running is a pretty simple trick. You (the bank) know your client is going to place a big order for a security. Since you know the price of the security will go up after that big buy, you place the bank's order ahead of your client's order.
Sometimes this results in the price of the security going up for your client.
In this case, according to Reuters, that client was Fannie Mae and Freddie Mac.
This was disclosed in a BrokerCheck filing on regulator FINRA's website. BrokerChecks allow anyone to look at a specific trader's professional background, and this report was filed with a former Bank of America trader named Eric Beckwith based in NYC. A bank spokesperson said the trader left the bank in July 2013. The filing dates back to June 2013.
Here's a screenshot of the section of Beckwith's report explaining the investigation:
The FBI warned Bank of America of this investigation on January 8th, but the bank has yet to be accused of any wrongdoing.
In the bulletin, the FBI warned of "unsophisticated tradecraft" such as hand signals or special ring tones that traders were using to deliver information about impending orders in the interest-rate swaps market.
Hand signals. Like we said, front running's a pretty old trick.