Bank of New York Mellon (“BNY Mellon”) is facing two more lawsuits over is supposed mismanagement of forex trading for pension funds. Florida and Virginia have filed charges against the beleaguered custody bank for allegedly cheating the state funds by giving them less favorable exchange rates for foreign exchange (“forex”) transactions.
In the brief filed by Florida, the state claims that “BNY Mellon added hidden spreads, including markups and markdowns to those foreign exchange trades rather than pricing the trades at the exchange at which it actually executed the transactions.” Florida is coming after the bank under the state’s false claims act. They allege that the bank submitted fraudulent claims for payment and used false records to justify those claims when it charged the pension funds a high exchange rate. Florida is pursuing triple the damages, with an additional $11,000 in penalties for each false claims violation.
The suit in Virginia alleges that senior BNY officials knew about and endorsed the currency-trading method that overcharged pensions. The attorney general estimates that the state lost $40 million due to these trading practices. The suit was filed on behalf of the Virginia Retirement System and two county retirement funds.
BNY Mellon has lawsuits pending in several other states. Throughout the process, the bank has remained steadfast in its insistence that it did no wrong. In an emailed statement, the bank called the charges “unwarranted” and said they “reflect a flawed understanding of foreign currency markets.” Though its “first choice is always an amicable solution,” BNY Mellon refuses “to be coerced into paying for and admitting to wrongdoing where none exists” and therefore plans to fight the lawsuit.