Prosecutors have taken over whistleblower lawsuits against Bank of New York Mellon and State Street Corp. that accuse the banks of fraud in overcharging public pension funds by tens of millions of dollars for foreign-exchange transactions, according to a Reuters article edited by Lincoln Feast, entitled “Prosecutors widen currency probes: report.”
These takeovers mark the widening of investigations by state attorneys general in California, Virginia, Florida and Tennessee into the $4 trillion-a-day international foreign-exchange (Forex) market.
Prosecutors were investigating reports that the banks charged state pension funds the highest price during the day when a Forex trade took place, rather than the (lower) rate the bank paid, and paid them the lowest price for the day when currencies were sold.
To maintain their anonymity, the whistleblowers used shell companies named FX Analytics (which sued Bank of New York Mellon) and Associates Against FX Insider Trading (which sued State Street Corp).
One of the whistleblowers was reportedly identified as Harry Markopolos, the investor who for years tried (unsuccessfully) to warn regulators about Bernard Madoff.
The Bank of New York Mellon lawsuit seeking $150 million in damages was filed in 2009 and taken over by Virginia state prosecutors this January, according to the article.
The State Street lawsuit alleged that the firm “raided” the custodial accounts of California’s two largest public pension funds in excess of $56 million by fraudulently pricing foreign currency trades. The state attorney general sued State Street in 2008 and 2009, according to the article.
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