Foreign Exchange

July 26, 2016

State Street Bank and Trust Company will pay $382.4 million in a global settlement for misleading mutual funds and other custody clients by applying hidden markups to foreign currency exchange trades.  As part of its custody bank line of business, State Street safeguards clients’ financial assets and offers such services as indirect foreign currency exchange trading (Indirect FX) for clients to buy and sell foreign currencies as needed to settle their transactions involving foreign securities.  An SEC investigation found that State Street realized substantial revenues by misleading custody clients about Indirect FX, telling some clients that it guaranteed the most competitive rates available on their foreign currency trades, provided “best execution,” or charged “market rates” on the transactions.  Instead, State Street set prices largely driven by predetermined, uniform markups and made no effort to obtain the best possible prices for these clients.  State Street will pay $167.4 million in disgorgement and penalties to the SEC, a $155 million penalty to the Department of Justice, and at least $60 million to ERISA plan clients in an agreement with the Department of Labor.  SEC

July 28, 2016

State Street Bank and Trust Company (State Street) will return $75 million in profits to resolve allegations it provided misleading information as to how it priced foreign exchange transactions, Massachusetts announced. The agreement is part of a $382 million federal-state global resolution in conjunction with the U.S. Securities and Exchange Commission, the U.S. Department of Justice, and the U.S. Department of Labor, along with three class action lawsuits. The agreement with the AG’s Office requires State Street to provide $75 million in disgorgement, along with a payment of $500,000 to the Commonwealth. Additional disgorgement and penalties will be paid by State Street through separate agreements with federal enforcement entities. MA

June 2, 2016

The SEC charged New York City-based trader Haena Park with defrauding investors out of millions of dollars by misrepresenting her investment track record, the profitability of her investments, and her use of investor funds.  The SEC alleges that Park touted her supposedly profitable futures and foreign exchange trading strategy when soliciting friends, family, former Harvard classmates, and individuals with connections to them.  She pooled investor finds and incurred heavy trading losses month after month in the futures and forex markets, yet repeatedly told investors that their investments were profitable and sent them monthly account statements showing fictitious profits.  She raised at least $14 million from more than 30 investors since 2012, and has suffered more than $16 million in trading losses during that time.  SEC

April 12, 2016

Brian Hinman agreed to pay over $1 million in penalties and disgorgement to settle charges that he aided and abetted Kevin White's Texas-based entities’ RFF GP, LLC and KGW Capital Management, LLC, in a scheme that fraudulently solicited participants in a foreign currency exchange pool named Revelation Forex Fund, LP.  CFTC

March 10, 2016

Two former derivatives traders at Rabobank Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) were sentenced to prison for manipulating the London Interbank Offered Rates (LIBOR) for the U.S. Dollar (USD) and Japanese Yen (JPY), benchmark interest rates to which trillions of dollars in interest rate contracts were tied.  Anthony Allen, the bank’s former global head of liquidity and finance in London, was sentenced to 24 months and Anthony Conti, a former senior trader on the bank’s money markets desk in London, was sentenced to 12 months.  DOJ

February 4, 2016

A federal court in Fort Lauderdale, Florida ordered Robert Tripode of Boynton Beach, Florida to pay over $300,000 in penalties and restitution in connection with his fraudulent activities in the Forex market as an employee and agent of Forex Monthly Income Fund (FMIF), a commodity pool based in Miami, Florida.  CFTC

March 19, 2015

Bank of New York Mellon agreed to pay $714 million to settle charges the bank engaged in fraud and other misconduct when providing foreign exchange (“FX”) services to its customers.  As part of the settlements with the US and New York, BNYM admitted that contrary to representations to clients that it provided “best rates” and “best execution” for FX transactions, the Bank actually gave clients the worst reported interbank rates of the trading day.  The charges originated in a lawsuit brought by a whistleblower under the New York False Claims Act.  Whistleblower Insider

November 16, 2015

The CFTC has filed a lawsuit against IB Capital FX, LLC (a/k/a IB Capital FX [NZ] LLP) d/b/a IB Capital, Michel Geurkink, and Emad Echadi, alleging that the defendant solicited and accepted at least $50 million from 960 clients, including almost 700 in the United States, for off-exchange margined retail foreign currency (forex) trading without being registered with the CFTC.  CFTC

September 25, 2015

The CFTC has charged Safety Capital Management, Inc. and GNS Capital, Inc., both doing business as FOREXNPOWER, John Won, and Sungmi Kang with fraudulent solicitation of over $1.5 million from customers to trade off-exchange foreign currency and misappropriation of over $622,000 of customer funds.  CFTC

September 8, 2015

Forex Capital Markets, LLC has agreed to pay $843,000 to settle charges that it failed to diligently supervise its officers’, employees’, and agents’ handling of accounts held in the name of a fraudulent foreign currency exchange pool, Revelation Forex Fund, LP. CFTC