If you’ve been trading the markets for a few years like myself… you probably know there are a lot of dirty players in the game. Today, I’ve got a story that made me grind my gears once I heard about it.
Ever heard of State Street (STT)?
If you haven’t, you should… because this company is behind some of the largest exchange-traded funds (ETFs) out there.
State Street manages ETFs like the SPDR S&P 500 ETF (SPY), SPDR Gold Trust (GLD), SPDR Dow Jones Industrial Average ETF (DIA)… basically any ETF you see with SPDR in front of it is managed by the firm.
This financial services company was designed to help investors and traders make money in the markets and collect a small fee.
Little do investors and traders know, State Street had some bad apples who directly stole from investors… and when you hear about this case, you’ll second guess letting STT, or any money manager, handle your hard-earned cash.
Instead, you may want to look into strategies that allow you to directly profit off shady players.
[Revealed] How State Street Stole $20M From Its Customers
Like any financial services company out there, State Street had a multitude of secrets it kept from customers. Nothing new there, we still see bald-faced lies on the street today.
One secret gave a customer god-like trading status, while the rest of the traders on the platform left in the dark. The other secret: STT directly screwed 6 customers out of $20 million dollars by way of hidden fees and markups.
The icing on the cake was the fact the company insulted the customers with crap excuses.
Here’s how it went down.
During the Great Recession, State Street began developing GovEx, an electronic platform that let regular folks trade U.S. Treasury securities. The company believed its platform would have a competitive edge because it could be used by everyone.
On September 17, 2009, GovEx finally made its debut.
But there was a hitch in the success of GovEx.
To reel in more subscribers and become truly successful, State Street needed subscribers who were willing to serve as liquidity providers.
In order to get subscribers on board, they gave specific subscribers special incentives so they would sign up for GovEx to make markets and provide liquidity.
How One Dirty Player Stole From Mom And Pop
One very special subscriber was already well known in State Street circles, let’s call him John Doe.
Mr. Doe had already used State Street’s other trading platforms and he was very familiar with trading government securities… trading against everyday traders like you and me was pretty much taking candy from a baby for him.
State Street jumped at the chance to have Mr. Doe be a market marker on GovEx from its launch.
Mr. Doe and State Street begin talks of a tool for him to use on GovEx. This tool would enable Mr. Doe to have a last look.
For a short period of time, he could reject match quotes that he submitted on GovEx. This last look would be available to only Mr. Doe. State Street’s plan was to eliminate Mr. Doe’s risks so that he would provide more liquidity to the GovEx platform.
In 2010 the tech was up and running. Mr. Doe was the one and only subscriber that knew and used this last look feature.
Most of the GovEx other subscribers were connected to Mr. Doe’s account. His account was the single market maker account on the platform as well as they only account to stream its quotes. Basically, he had a monopoly.
While subscribers saw Mr. Doe’s moves and matches. What they did not see the rejected 57 matches that had a face value of $1 million EACH! Mr. Doe’s special ability was kept on the down-low the whole time.
State Street decided to start overcharging their customers as well.
State Street clients had an agreement that was pretty specific about the charges that the transition management customers would receive, every aspect was disclosed.
However, stealing was left out…
State Street began to sneak unauthorized markups, commissions, and hidden fees into a target 6 customers bill.
State Street traders were instructed to take commissions and markups these 6 clients transition despite agreement detailing specifically what the customer could be charged for. These traders were then instructed to make reports that hid these sneaky markups and commissions.
One of the six clients discovered the hidden markups and confronted the trader.
The trader decided to lie to the client… these lies included the terrible explanations of “inadvertent commissions” and a “fat finger error” being the reasoning behind the charges.
State Street tried its best to keep this scam undercover. They used doctored trading statements, pre-trade estimates, and post-trade estimates to hide the sneaky commissions on certain transactions. Purchases like the buying and selling of bonds and several other securities were specifically targeted.
Total State Street took these 6 transition management customers for about $20 million.
Stealing that kind of cash hardly goes unnoticed.
State Street has agreed to cough up $35 million for keeping the mysterious Mr. Doe’s god-like ability to have the last look a secret from customers and for stealing $20 million by way of hidden charges.
The thing is… this is just one of the many cases out there, and if you don’t conduct due diligence, you’re probably being taken for a wild ride. However, I’ve uncovered a unique way to directly profit off the backs of some of the largest players on Wall Street.
If you want to take back the reins from Wall Street, click here or below to watch this exclusive training session.