Whistleblowers Srike Again


Bank of New York Mellon and the state of Virginia have agreed to resolve their dispute over BNY Mellon’s allegedly overcharging Virginia’s employee pension fund on currency transactions by means of hidden markups. The settlement calls for a $1.1 million payment to a whistleblower group (“Whistleblower to Get Big Payment in Bank of New York-Virginia Deal,” by Christian Berthelson, Wall Street Journal).

Virginia is one of several states that sued BNY Mellon over its foreign-exchange practices. The whistleblower payment is the first to be paid in these cases. According to the U. S. Department of Justice, BNY Mellon overcharged various clients by $1.5 billion in one four-year period, so this payment may be the first of many.

The settlement further provides that Virginia will not sue BNY Mellon in exchange for reduced fees pursuant to a new custodial agreement with BNY Mellon. Virginia’s False Claims Act lawsuit against BNY Mellon was dismissed in May.

FX Analytics, the whistleblower group that will receive the $1.1 million, includes Grant Wilson, who served as a secret informant for two years as he traded Japanese yen on a BNY Mellon trading desk, and Harry Markopolos, whose early tip to the SEC about Madoff’s multibillion-dollar fraud was swept under a rug.

While Mr. Wilson worked at BNY Mellon, he and his legal team met on Saturdays so that Mr. Wilson would not be missed at the office. The information and documents obtained by Mr. Wilson shed light on how the alleged scheme worked and how BNY Mellon profited from it, thereby aiding FX Analytics and ultimately the government in their investigations into BNY Mellon’s alleged unlawful scheme.

Regulators often need information from whistleblowers inside financial firms to develop fraud cases and have made efforts to ramp up their whistleblower programs. A whistleblower is said to be assisting an SEC investigation into whether high-frequency trading firms are being allowed to jump ahead of ordinary investors, according to the Wall Street Journal.

A number of noteworthy whistleblower awards have been made this year. The IRS recently paid out the largest-ever whistleblower award, $104 million, to a former employee of UBS AG, who exposed an unlawful scheme by the bank.

Earlier this year, the SEC awarded the first payment under the whistleblower provisions of Dodd-Frank. The SEC paid almost $50,000 to an informant who blew the whistle on a multimillion-dollar fraud. The SEC is expected to pay $452 million to whistleblowers across the country. The SEC’s whistleblower program provides for payments from 10% up to 30% of the amount collected in an enforcement case.

Page Perry is an Atlanta-based law firm with over 150 years of collective experience maintaining integrity in the investment markets and protecting investor rights.