More On Legal & Compliancefrom The Advisor's Professional Library
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The Justice Department and New York Attorney General Eric Schneiderman filed lawsuits Tuesday against the Bank of New York Mellon for allegedly defrauding clients in foreign currency exchange transactions.
The lawsuit seeks to recover the profits BNY Mellon earned “by deceiving its customers. 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.
“Over a 10-year period, BNY Mellon consistently misrepresented to customers the rates it would give foreign currency transactions,” according to the suit. “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.”
The New York attorney general's office also weighed in. “This landmark case uncovered a fraud committed against both government and private pension funds,” Executive Deputy Attorney General Karla Sanchez said in a statement. “This office will continue to commit its full resources to hold those responsible accountable, seek restitution for the victims, ensure that our markets are fair and transparent, and uphold one set of rules for all market participants.”
BNY Mellon vigorously denied the allegations Wednesday, releasing a statement claiming the New York attorney general is wrong on the facts of the case and the law to which it pertains and said they will defend against claims they call “baseless.”
"The claims in this lawsuit are flat out wrong, both on the law and on the facts, according to the statement. “They reflect a fundamental misunderstanding by the Attorney General and his staff of the role of custodian banks and the operation of institutional FX markets. We will defend ourselves vigorously on behalf of our shareholders, including many pension funds, and our more than 50,000 employees, 8,700 of whom are based in New York.
"Above all, our client relationships and our integrity are our most valuable assets. We are always open to resolving issues about our services on a commercial basis with our clients–it is how we remain competitive, because every day we are competing in the marketplace for their business,” the report said.