BNY Mellon and State Street are being swapped out for J.P. Morgan and Citigroup as custodians of international investments for four Ohio pension funds, state treasurer Josh Mandel said.
The change is brought about after BNY Mellon was sued for $16m on March 12 by Ohio attorney general Mike DeWine on behalf of the Ohio Police & Fire pension fund, and the School Employees Retirement System of Ohio. DeWine alleges fraud, deceptive practices and breach of contract when BNY conducted foreign currency trades.
A spokesman for BNY Mellon said: "We're disappointed by the treasurer's actions. As we have stated previously, the suit by the Ohio attorney general recycles baseless allegations and we are confident we are right on the facts and the law."
This is the first time a state has completely severed ties with BNY Mellon amid the currency-trading investigations. Previously, pension funds in Massachusetts and Los Angeles have restricted foreign exchange trading with the bank.
State Street is currently being sued by the U.S. Department of Justice and other states over fraud and deceptive-practice allegations. The California attorney general previously sued the company, alleging that it overcharged a state pension fund. State Street has disclosed that federal authorities are investigating the currency-trading activities of the bank, but asserts it hasn't engaged in wrongdoing.
State Street refused to comment on the change other than stating Ohio remained: ‘a valuable client.’
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