Bank of New York Mellon Faces $2 billion Lawsuit

October 07 00:00 2011

New York, October 7 ( –  It seems to be a season of multibillion dollar lawsuits filed against banks. First AIG filed a lawsuit against Bank of America (NYSE: BA), and then it was the governments turn to file lawsuits on pretty much every bank. Now it’s the turn of Bank of New York Mellon (BNY). Bank Of New York has been sued by the federal agencies to the tune of $2 billion on the allegations that it did not act in the best interest of their clients pertaining to some foreign exchange dealings.

Pension funds in the state of New York routinely deal with foreign securities and a result have to buy and sell foreign exchange in large amounts. BNY was selected as the forex broker for these funds. However, the funds now allege that BNY was misrepresenting the prevailing currency exchange rates. BNY would give the funds the worst currency rates possible. The allegations say that it would buy the currency at the spot rate after getting instructions from the bank. Later it would add an unusually wide spread and sell it to the funds.

Since the transactions ran into billions and maybe even trillions of dollars, BNY Mellon may have pocketed a good amount, if the allegations are actually true.