BNP Paribas is facing allegations that its traders mis-sell billions of euros in money-losing foreign exchange products to Europe’s largest wine exporter, the latest accusations in the widening controversy also shrouding Goldman Sachs and Deutsche Bank.
Founded in Gomila in southeastern Spain in 1890, J. García Carrión is in dispute with a French lender over currency transactions with cumulative amounts of tens of billions of euros. The company claims that losing deals were inappropriately made with one of its former senior managers between 2015 and 2020, according to people familiar with the matter.
BNP is one of several banks facing complaints from corporate clients in Spain about the alleged missale of foreign exchange derivatives, which has led some companies into financial difficulties.
Deutsche Bank has launched an internal investigation From the alleged bad selling that this week led to The departure of two senior executivesLouise Kitchen and Jonathan Tinker.
An internal JGC investigation found that the BNP conducted more than 8,400 foreign exchange transactions with the company over the five-year period, which equates to about six per business day.
This level of activity is much higher than what the company would have needed to normally hedge exchange rate risk on international wine exports, the people said, adding that the Spanish company had shared the results of its internal investigation with BNP.
While the vast majority of losing trades relate to euro-dollar swaps that moved against the bank, some were in currency pairs where the JGC has little or no operations, such as the Swedish krona in euros.
As a direct result, the 850 million-euro company generated about 75 million euros in cash losses in those five years, while BNP could have generated more than 100 million euros in revenue from transactions, the people added. Many trades were made through the trading desks in London.
The executives demanded compensation for at least some of the losses, arguing that merchants or BNB’s compliance department should have monitored and reported the disproportionately high level of transactions and profits from a single customer, according to several people familiar with the events.
One person says the trades were designed as bets on the currency markets, not a hedge, and is considering filing a lawsuit to try to recover some of the money.
“BNP Paribas strictly complies 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 relationships.’
JGC declined to comment.
Separately, Spanish wine producer Goldman Sachs is suing in the High Court of London to partially recover $6.2 million in losses from foreign currency derivatives. Goldman emphasized that the products were not overly complex for a multinational with hedging needs and were entered into with full disclosure of risk.
In Madrid, the wine company also filed a case against a former senior executive who was responsible for signing the losing deals. The JGC claims that this person conducted the deals secretly and covered them up internally by falsifying documents and misleading auditors.
In the lawsuit in London, the JGC alleges that its CEO was acting “encouraged and/or in accordance with the recommendations of ‘Goldman employees’ for speculative rather than investing or hedging purposes.”
Deutsche Bank has been investigating for months whether its traders in London and Madrid have bypassed EU rules and persuaded hundreds of Spanish companies to buy complex foreign exchange derivatives they don’t need or understand.
The Financial Times reported that the German bank had settled many of the complaints against it in secret and had avoided going to court.
People familiar with the matter told the Financial Times that Kitchener and Tinker’s departures were related to an investigation into the alleged missale, which appears to have occurred in units the two were overseeing at the time.
The bank declined to comment. Kitchen and Tinker did not respond to requests for comment.