Attorney General Eric T. Schneiderman and United States Attorney for the Southern District of New York Preet Bharara announced a settlement with the Bank of New York Mellon (BNYM) that resolves cases brought regarding BNYM's fraudulent foreign exchange practices.
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BNYM has agreed to pay $714 million to resolve the federal and state governments' cases, certain private cases that arose as a result of the same fraud, and investigations by the Securities and Exchange Commission and the U.S. Department of Labor.
In addition to the significant monetary recovery, Attorney General Schneiderman and U.S. Attorney Bharara obtained additional key settlement terms: namely, BNYM has admitted the factual details of its fraud, will end the employment of certain executives involved in the fraud, will reform its practices to improve and increase the information it provides to its customers, and will waive the deductibility of New York State and local taxes with respect to the New York State portion of the settlement.
Of the $714 million in settlement funds announced today, New York State and the Department of Justice will each be allocated
$167.5 million, and Attorney General Schneiderman will direct nearly the entire New York State amount to compensate BNYM's customers who were victims of BNYM's fraud. Two New York State agencies - the New York State Deferred Compensation Plan and SUNY - were among the customers BNYM defrauded and will be fully compensated for their losses.
As alleged in this case, BNYM systematically misrepresented how it handled its customers' FX transactions. BNYM told customers that its Standing Instruction FX program was an automated service that allowed a client to rely upon BNYM to obtain an FX rate and execute FX trades on the customer's behalf without any supervision or direct involvement by the customer, and that BNYM would obtain the "best rates" available for its customers.
Senior BNYM executives knew that BNYM's representations about FX pricing were false. In fact, BNYM obtained the best FX rates for itself, gave its customers the worst or close to the worst rates, and kept the difference for itself. ■