BNY Mellon Sued for $2 billion over Currency Trades

October 05 00:00 2011

New York, October 5 (RainbowNewsLine.com) – A suit has been filed by New York Attorney General Eric Schneiderman and the city of New York against Bank of New York Mellon for nearly $2 billion. The allegation is that the bank had defrauded clients in foreign currency exchange transactions.

It was alleged by the attorney general that over a period of ten years, BNY Mellon had provided the worst or nearly the worst rates of the trading day instead of providing them with the “best rate of the day” or “best execution” as promised, to customers of its “Standing Instructions” program.

The attorney general said that a lengthy investigation into the custody bank’s practices had revealed these irregularities. He further stated that BNY Mellon employee testimony admitted the bank “neither sought the best rates for Standing Instructions customers nor provided best execution.”

The lawsuit alleged that BNY Mellon made its profit by retaining the difference between the worst price of the day, which the clients had to pay, and the actual market price at the time of the trades. The bank did not reveal its pricing practices to its clients.

Investigations had revealed that the currency exchange trades through the bank’s Standing Instruction program were “seven times more profitable” to the bank than foreign exchange transactions that were directly negotiated. A separate suit against BNY Mellon has been filed by the Justice Department.

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