Forex Fraud Case Reveals the Value of Whistleblowers


Bank of New York Mellon has been sued in separate civil lawsuits filed by the U.S. Department of Justice and the Attorney General of New York seeking damages in excess of $2 billion related to BNY’s alleged practice of fraudulently misleading and overcharging public pension funds, universities, and other clients for foreign exchange (FX) currency transactions. In essence, the complaints allege that BNY Mellon profited by giving its foreign exchange clients the worst exchange rates of the day, and even created fake trades.

In August, California, Virginia and Florida sued BNY Mellon for overcharging in foreign currency trades, and California has filed a similar lawsuit against State Street Corp.

The cases are expected to shine a light on the banks’ deceptive practices associated with “Standing Instruction FX.” The clients involved in the cases did not negotiate their own foreign currency transactions. Instead they gave BNY Mellon or State Street a standing instruction to trade for them. Such clients, like pensions and universities, are not in the business of currency trading but need foreign money to transact business overseas. The complaint against State Street alleges that the bank referred to them as “dumb” clients as opposed to “smart” clients that negotiated foreign currency trades to get a better rate.

A Wall Street Journal study revealed that BNY Mellon priced 58% of foreign currency trades near the point of the day’s trading range that was least favorable to its customers/clients. BNY Mellon previously admitted that it tends to price currency trades at one end of each day’s “interbank” trading range, but said there was nothing improper about the practice.

BNY Mellon is on record as admitting it did not act in its clients’ best interests in pricing foreign currency trades. The bank said its clients are to blame because they knew or should have known what was going on.

The investigation into these practices began with Harry Markopolos, the fraud investigator who tried to alert the SEC to the Madoff fraud years before it fell apart. Markopolos put together a group of whistleblowers to investigate and build a case on his insight that such gouging was going on. The identity of the inside whistleblower at BNY Mellon was disclosed by the filings. His identity had been kept secret for two years even as BNY Mellon looked for the whistleblower.

The Markopolos group first filed their own lawsuits against the banks based on the whistleblowers’ information. Then several state attorneys general, believing the claims to have merit, took them over. The whistleblowers stand to receive up to 25% of any recovery.

Page Perry is an Atlanta-based law firm with over 150 years collective experience representing investors in securities and commodities related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. The firm is actively investigating foreign exchange fraud claims. For further information, please contact us.