(COLUMBUS, Ohio)— Ohio Attorney General Mike DeWine today filed a lawsuit against The Bank of New York Mellon (“BNY Mellon”) for breach of contract, fraud, violations of the Ohio Deceptive Trade Practices Act and unjust enrichment on behalf of Ohio Police & Fire Pension Fund (OP&F) and School Employees Retirement System (SERS).
OP&F and SERS, two pension funds serving thousands of Ohio’s first responders, school employees and their families, previously entered into individual custodial agreements with BNY Mellon to perform foreign currency exchanges, or FX trades, on their behalf. The funds require these exchange services from their custodian to convert U.S. Dollars into the applicable foreign currency when purchasing stock sold on a non-U.S. exchange. The Attorney General’s Office examined the FX trades completed by BNY Mellon and found apparent discrepancies between prevailing market rates on the days in which trades were completed, and the rates that OP&F and SERS were, on average, charged and credited. These discrepancies resulted in millions of dollars in apparent overcharges to OP&F and SERS.
“As a result of my office’s investigation into this matter, our complaint alleges that BNY Mellon violated the terms of their custodial agreements with the Ohio funds, and exploited the volatility of the foreign currency market to their advantage at the expense of Ohio pensioners and their families,” said Attorney General DeWine.
In the complaint, the plaintiffs allege that BNY Mellon defrauded the pension funds by systematically overcharging them on currency transactions. At issue in the suit is BNY Mellon’s “standing instruction” service, whereby the pension funds and other clients allow the bank to unilaterally handle their FX transactions. The complaint alleges that BNY Mellon collected the currency trades for their “standing instruction” clients and then later in the day set the price that was most favorable to the bank. The prices were often at or near the day’s least-favorable exchange rates, with the bank profiting from the difference.
OP&F and SERS seek damages in excess of $16 million for losses the complaint alleges were incurred by the funds as a result of BNY Mellon’s fraudulent practices.
Lisa Hackley: 614-466-3840
Dan Tierney: 614-466-3840
Copy of Lawsuit (PDF)