Bank of New York Mellon Corp. has agreed to pay $714 million to resolve the federal and state governments’ cases, certain private cases that arose as a result of the same fraud, and investigations by the Securities and Exchange Commission and the U.S. Department of Labor. According to the Government, BNYM and its executives, motivated by outsized profits and bonuses, breached this trust and repeatedly misled clients to believe that the pricing they were getting on foreign exchange was far better than it actually was.
The payment will resolve lawsuits filed by New York state and federal authorities claiming that BNY Mellon told clients it would provide them with the best possible execution, but instead gave them the worst rates of the day. Meantime, BNY Mellon obtained better spot prices for itself and profited on the spread, they said.
As alleged in the case, BNYM systematically misrepresented how it handled its customers’ foreign exchange (FX) transactions. BNYM told customers that its Standing Instruction FX program was an automated service that allowed a client to rely upon BNYM to obtain an FX rate and execute FX trades on the customer’s behalf without any supervision or direct involvement by the customer, and that BNYM would obtain the “best rates” available for its customers. Senior BNYM executives knew that BNYM’s representations about FX pricing were false. In fact, BNYM obtained the best FX rates for itself, gave its customers the worst or close to the worst rates, and kept the difference for itself.
The lawsuits stated that the bank earned $2 billion over ten years through the alleged deception. A separate U.S. Department of Justice lawsuit said the bank defrauded clients of hundreds of millions of dollars through the scheme between 2000 and the lawsuit’s filing in 2011.
The cases include United States v. Bank of New York Mellon, U.S. District Court, Southern District of New York, No. 11-06969, and People of the State of New York v. Bank of New York Mellon, New York State Supreme Court, New York County, No. 114735/2009.
Jeffrey Newman represents whistleblowers.