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BNP Paribas is facing allegations that its traders mistakenly sold billions of euros in loss-making foreign exchange products to Europe’s largest wine exporter. This is the latest allegation in a growing dispute between Goldman Sachs and Deutsche Bank.
J. García Carrión was founded in Jumilla in southeastern Spain in 1890, and disputes with this French bank over currency transactions with a cumulative nominal value of tens of billions of euros. According to people familiar with the matter, it claimed that the loss-making transaction was an improper transaction with a former senior executive between 2015 and 2020.
BNP Paribas is one of several banks that have faced complaints from Spanish corporate clients for allegedly improperly selling foreign exchange derivatives, which has caused some companies to fall into financial difficulties.
Deutsche Bank has launched an internal investigation The alleged improper sales this week resulted in Two senior managers leave, Louis Kitchen and Jonathan Tinker.
An internal investigation by JGC found that BNP Paribas had conducted more than 8,400 foreign exchange transactions with the company over a five-year period, equivalent to about 6 transactions per working day.
People familiar with the matter said that this level of activity is much higher than the level required for the company to normally hedge the exchange rate risk of international wine exports, adding that the Spanish company has shared the results of its internal investigation with BNP Paribas.
Although the vast majority of loss-making trades are related to euro-dollar swaps that are detrimental to banks, some are in currency pairs where JGC has little or no business, such as the euro-Swedish krona.
The person familiar with the matter added that the direct result is that the company with a revenue of 850 million euros lost about 75 million euros in these five years, while BNP Paribas could have earned more than 100 million euros in revenue from the transaction. Many transactions are conducted through trading desks in London.
According to a number of people familiar with the matter, the executives demanded at least partial damages, believing that BNP Paribas’s traders or compliance department should find and report disproportionately high-level transactions and profits from individual customers.
A person familiar with the matter said that JGC stated that these transactions are intended to bet on the currency market, not to hedge, and is considering filing a lawsuit to try to recover some of the funds.
“BNP Paribas is very strict in complying with all regulatory obligations related to the sale of derivatives and foreign exchange instruments,” the bank said in a statement. “We do not comment on customer relations.”
JGC declined to comment.
In addition, the Spanish wine producer is suing Goldman Sachs in the High Court of London, demanding a partial refund of US$6.2 million in losses caused by foreign currency derivatives. Goldman Sachs insists that for multinational companies with hedging needs, these products are not overly complicated and are concluded with full disclosure of risks.
In Madrid, the wine company also filed a lawsuit against former senior managers who were responsible for signing loss-making transactions. JGC alleged that this person conducted transactions in secret and covered up these transactions internally by falsifying documents and misleading auditors.
In the London lawsuit, JGC claimed that its executives “acted with the encouragement and/or advice of Goldman Sachs employees” and “for speculation rather than investment or hedging purposes”.
Deutsche Bank has been investigating for months whether its traders in London and Madrid circumvented EU regulations and persuaded hundreds of Spanish companies to buy complex foreign exchange derivatives that they did not need or understand.
The Financial Times reported that the German bank had privately resolved many complaints against it and avoided going to court.
A person familiar with the matter told the Financial Times that the departure of Kitchen and Tinker was related to the investigation of suspected improper sales, which appeared to have occurred in a unit supervised by the two at the time.
The bank declined to comment. Kitchen and Tinker did not respond to requests for comment.
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