Back in 2009 the California attorney general’s office has charged the State Street Corporation (company that owns Currenex) with fraud, accusing the company of cheating the state’s two largest pension funds of at least $56.6 million by overcharging them for a series of foreign exchange trades.
Now also the Arkansas Teacher Retirement System sued State Street Corp. over claims that the Boston-based bank engaged in unfair and deceptive practices regarding foreign exchange transactions.
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The Arkansas pension fund, which seeks to represent other State Street clients in a class-action lawsuit, said in a complaint filed yesterday in Boston that State Street charges inflated FX rates when buying foreign currency for its custodial customers and deflated rates when selling. The fund said State Street made as much as $500 million in profits from unfair foreign exchange practices and it is asking for three times the amount of damages it and members of the purported class suffered for violations of Massachusetts Consumer Protection Act. California sued State Street in October 2009 to recover what officials said were more than $200 million in illegal overcharges owed to the state’s two largest pension funds for foreign currency trading fees.
This adds to WSJ’s report from last week that some of America’s largest investment firms suspect they didn’t receive the prevailing rates on the market and if you calculate the size of these firms the mark-ups and rates differences get to huge sums.
So if the big boys are doing it time and time again why wouldn’t the small ones do the same if not worse?