Transit System Sues BNY Mellon Over 'Unlawfully Obtained' Proceeds From Forex Trading

(March 10, 2011) — In an effort to recover allegedly unlawfully obtained proceeds from foreign-exchange transactions, the Southeastern Pennsylvania Transit Authority (SEPTA) has sued Bank of New York Mellon.

Both BNY Mellon and State Street have been accused of manipulating FX transactions and overcharging pension systems for transactions in order to maximize their profits at the expense of clients. The lawsuit against BNY Mellon comes on the heels of two whistle-blower cases filed against the bank in Florida and Virginia. The proposed class action against BNY Mellon, filed in a Philadelphia federal court on Monday, incorporates allegations made in the whistleblower lawsuits, Reuters reported.

Last month, State Street was sued by the Arkansas Teacher Retirement System over an investigation into whether banks overcharged public pensions for foreign-exchange transactions. Filed in the US district court in Boston, the suit claimed that State Street, the custody bank for more than 40% of US public pension funds, violated state law by overcharging customers for currency trades. The suit alleged that the bank generated as much as $500 million in profits annually — a rate of profit that accounts for about 50% of State Street’s foreign exchange profits over the last decade, according to Reuters. In response, State Street said the Boston-based company is “firmly committed to providing its clients with quality service and transparency in meeting their FX needs. We will vigorously defend the allegations made in the complaint and we stand by our business practices.”

Both Bank of New York Mellon and State Street deny wrongdoing. In a statement, BNY Mellon said: “The allegations are without merit. We provide a broad range of valuable services including foreign exchange to large, sophisticated money managers representing pension funds and other institutional clients. The money managers transact with us at competitive FX prices and we provide reliable, low-risk service and execution. We will defend ourselves vigorously.”