October 5, 2011
New York Charges BNY Mellon with Defrauding Clients in Forex Transactions
The New York Attorney General and the City of New York filed a lawsuit against the Bank of New York Mellon (BNY Mellon) for defrauding clients in foreign currency exchange transactions. The victims include both public and private pension funds, including those of the New York City Employee Retirement System (NYCERS) and the State University of New York.
According to the AG's press release, over a 10-year period, BNY Mellon consistently misrepresented to customers the rates it would give foreign currency transactions. Instead of providing the best interbank rates– as it promised – BNY Mellon gave the worst or nearly the worst rates of the trading day. The Bank made nearly $2 billion from these trades, accounting for over 65 percent of its foreign exchange revenues.
New York City pension funds were among the most impacted of BNY Mellon’s clients and lost tens of millions of dollars as a result of its fraudulent rates. In addition to NYCERS, those funds include the Teachers Retirement System of the City of New York, the New York City Police Pension Fund, Subchapter 2, and the New York City Fire Department Pension Fund, Subchapter 2.
The case began when a whistleblower, FX Analytics, filed a complaint with the Attorney General’s officein 2009. The whistleblower’s complaint was filed under seal while the Attorney General had the opportunity to investigate the matter. The Attorney General seeks to force BNY Mellon to return its profits, restitution, damages, and with respect to the False Claims Act violations, triple damages and penalties of $12,000 per violation.
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