A lawsuit filed under New York’s False Claims Act by a whistleblower in 2009 started the government’s investigation into BNY Mellon’s foreign exchange (Forex) practices. Today, the bank agreed to pay $714 million to settle with multiple government agencies and its customers.
According to a press release by New York Attorney General Eric Schneiderman’s office and the lawsuit, BNY Mellon agreed to give its customers the best price on foreign exchange transactions of the day. Instead, it gave the investors using its financial institution the worst price (or nearly the worst) and kept the best price for itself – pocketing the difference.
The lawsuit filed by New York State in 2011 sought to recover on behalf of state pension funds the $2 billion BNY Mellon earned while using the scheme for the past decade. The U.S. Government’s lawsuit, filed separately the same year, sought hundreds of millions in penalties.
In the settlement, the U.S. Department of Justice and the New York Attorney General will both receive $167.5 million. The class action will split $335 million among the bank’s customers. The Securities & Exchange Commission (SEC) and the Department of Labor also participated in the settlement.
According to a Wall Street Journal article in 2011, the whistleblowers also submitted information to the SEC whistleblower program. The article also mentions similar information provided about currency practices at State Street.
This investigations were separate from the government’s currency manipulation investigation which we discussed earlier in the week.