A group of three bank employees assembled by Harry Markopolos, the forensic accountant who spotted Bernard Madoff’s $65 billion Ponzi scheme years before it imploded, are about to get paid massive sums for their efforts to uncover securities law violations in the foreign exchange markets.
Grant Wilson, Peter Cera and Ryan Gagne were all recruited or aided by Mr. Markopolos. The anticipated windfall for the trio could be the largest issued by the U.S. watchdog since its whistleblower program began nearly five years ago.
According to an analysis by the Wall Street Journal, settlements made between U.S. regulators with State Street Corp. and Bank of New York Mellon Corp. could produce whistleblower awards exceeding $100 million for three former employees who uncovered the banks’ alleged mistreatment of FX trading clients.
According to information made public on his Linkedin profile, Ryan Gagne worked at State Street since 1995 and served as the Boston-based bank’s vice president prior to his departure in 2003. Earlier last year, FortuneZ reported on Mr. Gagne when the veteran institutional mainstay joined Divisa Capital UK Ltd as the sales specialist in the North American region, coming from Alpari (US) where he worked as its Vice President of Institutional Sales since 2012.
Regulators to encourage tipsters
Late last month, State Street Corp (STT.N) agreed to pay a total of $530 million to resolve all pending litigation and regulatory matters in the United States related to its indirect foreign exchange business. In turn, Bank of New York Mellon Corp agreed in March 2015 to pay $714 million to clear a thicket of lawsuits alleging that the bank had overcharged pension funds and other clients on foreign-currency transactions.
Mr. Markopolos began his investigation into the possibility that trust banks don’t price FX transactions for custody clients, many of whom were public pension funds, financial institutions and non-profit organizations, at prevailing interbank market rates since 2011.
Mr. Markopolos set out in search of bank employees to prove his case, persuading Messrs. Cera, Gagne and Wilson to help. The hybrid team spent years digging up evidence of the currency manipulations and that those banks executed FX transactions in a manner that enabled them to reap substantial profits at the expense of its custody clients.
Based on WSJ analysis, Mr. Wilson, a trader at BNY Mellon’s Pittsburgh office, could receive an award approaching $60 million, while the two former State Street employees, Messrs. Cera and Gagne, could claim more than $90 million combined.
For his role in bringing the foreign exchange fraud allegations to the government’s attention, Mr. Markopolos will receive a whistleblower reward that has yet to be determined. While technically not a whistleblower himself, he worked to recruit those who came forward and was instrumental in setting in motion the government’s cases.
According to the SEC’s program, eligible whistleblowers receive between 10 percent and 30 percent of the monetary sanctions collected. All whistleblower awards are paid from the CFTC Customer Protection Fund established by Congress and financed entirely through monetary sanctions paid to the CFTC by violators of the CEA.