BOSTON/SAN FRANCISCO, Feb 16 (Reuters Legal) - Recently unsealed lawsuits against Bank of New York Mellon contend it overcharges customers about $500 million a year for foreign currency trades, showing the high stakes facing banks in ongoing probes.

The figure is disclosed in lawsuits filed on behalf of pension funds in Florida and Virginia. It follows claims of an annual $400 million national fraud contained in a lawsuit against State Street Corp in California.

Broadly, the suits allege the banks improperly charged unfairly high prices for forex transactions, inflating their own profits.

Both banks have denied wrongdoing and vowed to defend themselves. Said a BNY Mellon spokesman: "The unsubstantiated claim that BNY Mellon engaged in 'fake' trades at 'false' prices is categorically untrue, and we will vigorously defend against these false allegations."

At the least, the $500 million figure suggests there is more room for other lawsuits to be brought by state retirement systems or investors who believe they paid custodial banks too much for foreign exchange transactions.

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Earlier today we reported how BlackRock Inc., in its own internal investigation, suspected the Bank of New York Mellon of spread widening.  Now Reuters India reports that the scrutiny of foreign currency trading in the United States is shifting to whether private investment firms, not just public pension funds, were overcharged by the banks that handle these lucrative transactions. 

Today, the Arkansas Teacher Retirement System brought suit against State Street, the latest pension fund to accuse trust banks of failing to give clients the best prices on foreign exchange trades. 

The suit, which was filed today in federal court in Massachusetts and which seeks class-action status, alleges that Boston-based State Street for more than a decade violated state law by overcharging many customers for currency trades.

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These things usually come in threes.  Wonder who's next? 

Some of the nation's largest investment firms have been overcharged by banks for currency trades, bank insiders and others claim, broadening the scope of alleged abuses in pockets of the $4 trillion foreign-exchange market.

BlackRock Inc., the world's largest fund manager, became concerned at the rates it and its clients were charged for some currency trades by custody banks including Bank of New York Mellon Corp. according to an internal BlackRock investigation about a year ago and people familiar with the firm.

BlackRock recently altered the way it trades currencies, either doing the trading itself or demanding evidence from custody banks that it is receiving prevailing market rates, said people familiar with the firm.

Read the full article at the WSJ.