July 26, 2016

Massachusetts-based State Street Bank and Trust Company agreed to pay a total of at least $382.4 million — including $155 million to the DOJ, $167.4 million in disgorgement and penalties to the SEC, and at least $60 million to ERISA plan clients in an agreement with the Department of Labor — to settle allegations that it deceived its custody clients when providing them with indirect foreign currency exchange (FX) services.  According to the government, State Street admitted that contrary to its representations to certain custody clients, it did not price FX transactions at prevailing interbank market rates and instead executed FX transactions by applying a predetermined, uniform mark-up (if the custody client was a FX purchaser) or mark-down (if the custody client was an FX seller) to the prevailing interbank rate for FX.  State Street is also alleged to have falsely informed custody clients that it provided “best execution” on FX transactions, that it guaranteed the most competitive rates available on FX transactions and that it priced FX transactions based on a variety of factors when, in fact, prices were largely driven by hidden mark-ups designed to maximize State Street’s profits.  The allegations originated from famed Bernie Madoff whistleblower Harry Markopolos under the whistleblower provisions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  State Street will pay an additional $147.6 to resolve private class action lawsuits filed by the bank’s customers alleging similar misconduct.  DOJ

Tagged in: FIRREA, Foreign Exchange, Misrepresentations, Securities Fraud, Whistleblower Case, Whistleblower Rewards,