State Street Nears Settlement of Forex Troubles
June 23, 2016
David J. Goldsmith discusses status of suit involving financial services holding company for trading scandal
State Street Bank and Trust Co. is on the verge of settling a proposed class action and three regulatory probes that scrutinized its foreign exchange trading practices. The terms of the imminent settlements were not disclosed, but they would involve payments to the federal government and a putative class of about 2,000.
The suit alleges that State Street cheated its customers out of millions of dollars a year by manipulating its exchange rates on foreign trades it carried out on investors’ behalf. State Street told its clients that it would get the best exchange rates possible when buying for them, but in fact charged some of the highest rates in the market, according to the suit. Then, the customers allege, State Street sold the currency at much lower rates and pocketed the difference.
Three federal regulators are also conducting investigations, and State Street is hoping to settle them all in one fell swoop. The company has reached settlements in principle, but they are interlocking, so they will not come into effect until the putative class action is resolved.
David J. Goldsmith of Labaton Sucharow, representing named plaintiff Arkansas Teacher Retirement System, said that he did not expect resistance to the settlement from the putative class. He added that the settlement came after 16 mediation sessions. “We’ve been excruciatingly in touch,” Goldsmith said.