Goldman Sachs Reported to U.K. Regulator Over Spanish Trades

Europe’s largest wine exporter has filed a complaint against Goldman Sachs Group Inc. with the U.K. financial regulator in the latest round of an escalating fight over currency trades that the Spanish firm says cost it millions of euros.

Lawyers for J. Garcia Carrion SA, whose brands include Pata Negra and Mayor de Castilla, this week sent a report summarizing its case against the bank’s international unit to the Financial Conduct Authority.

The complaint, filed on June 15, alleges that Goldman Sachs International “incited the sale of unauthorized speculative derivatives unconnected to Garcia Carrion’s business, with obscure implicit fees, and without regard to the relevant regulation relating to communicating risks and the volume of the client’s business,” a spokesman for the company said in an emailed statement.

In January, the company sued the New York-headquartered investment bank in the U.K. over the sale of foreign exchange derivatives, part of a wider case involving allegations that its former finance director entered into unauthorized trades with a range of banks, including BNP Paribas SA and Deutsche Bank AG.

Goldman Suit

Goldman Sachs, which is fighting the claims and has denied any wrongdoing, had already sued JGC in the U.K in September in order to recover $6.2 million it says the Spanish firm owes it, according to a court filing.

“For years J. Garcia Carrion S.A. profited without complaint from its use of FX derivatives with Goldman Sachs to manage its international currency exposure,” the bank said in a statement. “The company’s refusal to make the payments due under the transactions in 2020 on the basis that these transactions were unknown to it and were beyond its capacity and authority was unjustifiable and left us with no option but to commence legal proceedings to recover the amount owed.”

Read more about the allegations

The widening controversy could roil what has proven to be a lucrative business for investment banks in the region. Questions over Deutsche Bank’s sale of risky products to Spanish companies has already led to executive departures and an ongoing internal investigation.

Spokespeople for the FCA, Deutsche Bank and BNP Paribas declined to comment.

Money Maker

JGC’s complaint alleges Goldman Sachs made a large amount of money at its expense in its dealings with Felix Villaverde, the firm’s former chief financial officer, who it has accused, along with his son, of defrauding the business. Villaverde’s lawyer didn’t respond to a request for comment.

The derivatives were mispriced to the degree that Goldman Sachs could have booked about 21 million euros ($25 million) of gains on the trades in question, JGC has estimated, according to people familiar with the matter. JGC realized losses of about 2.5 million euros between the start of 2019 and up to September 2020 on those trades, the people said.

JGC has already called on other European regulators to investigate and in a statement issued this week said that the banks “involved, such as BNP Paribas and Goldman Sachs International, haven’t complied with the applicable banking regulation, so these facts have been notified to the Bank of Spain and will also be notified to their respective European regulators.”

Project Teal

Deutsche Bank is carrying out its own internal investigation into the sale of risky investments to Spanish clients, who now say they didn’t properly understand them. Codenamed Project Teal, the probe began in response to client complaints last year originally focused on a desk in Spain that sells hedges, swaps and derivatives, a person familiar with the matter previously told Bloomberg News.

This month, Louise Kitchen, head of Deutsche Bank’s capital release unit, and Jonathan Tinker, co-head of global FX at Deutsche, left the bank. Their departures are linked to the bank’s internal investigation, according to a person familiar with matter. Kitchen declined to comment and Tinker didn’t respond to requests for comment.

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