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US Filed Lawsuit Against Bank of New York Mellon

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U.S. Attorney Preet Bharara has sued BNYM for “hundreds of millions of dollars,” accusing the bank of defrauding clients on foreign-exchange services since 2000, and lying about it. The Attorney General of New York filed a separate lawsuit against the bank for $2 billion in damages.

The 19-page federal lawsuit claims that, under standing instruction, “… BNYM waits until the end of the trading day to price standing instruction currency trades and consistently gives standing instruction clients virtually the worst rates of the day. At the same time, BNYM obtains more favorable prices for itself on the spot market, reaping large profits on the price differential or ‘spread.’

“The large spreads BNYM has obtained on standing instruction foreign exchange trades at the expense of its clients have accounted for the lion’s share of BNYM’s profits from all foreign exchange channels. The size of the spread BNYM derives from its clients depends in large part upon volatility in currency prices; the greater the volatility, the greater the opportunity for a large spread. Indeed, during the financial crisis in 2008, when currency prices fluctuated dramatically, the profits BNYM generated at the expense of its custodial clients were enormous.

“Because BNYM does not provide time stamps to its clients indicating when during the day the trades were executed, it is extremely difficult, if not impossible, for clients to determine whether the prices they received are fair and reasonable. When clients have made inquiries of BNYM about its pricing scheme, BNYM has consistently misled them by providing false and/or incomplete information.

“As a result of this scheme, BNYM has collectively defrauded its custodial clients, which include federally insured financial institutions and/or their subsidiaries or affiliates, of hundreds of millions of dollars.”

 

breakinglawsuitnews.com disclaimer: This article: US Filed Lawsuit Against Bank of New York Mellon was posted on Thursday, October 6th, 2011 at 6:52 pm at breakinglawsuitnews.com and is filed under Fraud Lawsuits.

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