BNY Mellon Settles Foreign Exchange Lawsuits and Agrees to Pay $714 Million pursuant to, among other things, the False Claims Act, the Martin Act and FIRREA

24th March 2015

Bank of New York Mellon Corp has agreed to pay $714 million to settle lawsuits brought by the U.S Department of Justice, the State of New York, the SEC, the U.S. Department of Labor and private investors involving foreign exchange services claiming that the bank overcharged pension funds and other clients over many years. The lawsuit by the DOJ was brought under the Financial Institutional Reform, Recovery, and Enforcement Act, a fraud injunction statute that is part of a comprehensive legislative plan to reform and strengthen the Federal Deposit Insurance System.  The New York State lawsuit was brought pursuant to the Martin Act, a piece of legislation in New York that gives the Attorney General fighting financial fraud extraordinary powers. As part of the settlement, BNY admitted to a statement of facts that allege that they misrepresented the pricing and execution of foreign exchange trades made for clients over multiple years. While the bank represented that it was providing “the best rates” and “the best execution” on foreign exchange pegged to interbank rates, it was actually giving its clients the worst reported prices on its rates. BNY will fire the head of product management at the bank in addition to other executives responsible for its misrepresentations. Under the settlement, the US Attorney and the New York Attorney General will each receive $167.5 million. The Department of Labor will receive $14 million, the SEC $30 million, in addition to the $335 million private settlement.