A pattern, not an accident
The sale of unsuitable derivatives to business owners is not a matter of chance, nor the result of isolated lapses by individual bank advisers. Regulatory documentation spanning the past two decades reveals a pattern so consistent it might be mistaken for choreography: a phase of aggressive sales of complex products (three to seven years), a wave of claims and proceedings (two to five years), regulatory fines and solemn declarations of reform—and then, within another two or three years, the same institutions resuming the same practices with new clients in new jurisdictions.
The Scale of the Phenomenon
The scale of the phenomenon is telling. In 2019, the U.K.’s Financial Conduct Authority levied fines totaling £1.1 billion (£1,114,918,000) against five global banks for manipulating foreign-exchange rates—conduct that directly affected currency options and their valuations: Citibank N.A., £225,575,000; HSBC Bank Plc, £216,363,000; JPMorgan Chase Bank N.A., £222,166,000; The Royal Bank of Scotland Plc, £217,000,000; and UBS AG, £233,814,000.
In 2024, Deutsche Bank reached a settlement with Palladium, a Spanish hotel chain, in a case valued at five hundred million euros involving losses on currency options and foreign-exchange instruments that had been marketed as hedges.
Palladium Hotel Group had entered into two hundred and fifty-nine derivative transactions with Deutsche Bank through 2019. The notional value of the derivatives peaked at €5.6 billion in 2017. The products had been presented as “safe hedges” against fluctuations in exchange rates and interest rates. The lawsuit was filed in September, 2021, in the High Court in London.
In February, 2025, the same bank was fined ten million euros by Spain’s financial regulator, the CNMV, and barred for one year from providing advisory services on complex currency instruments—for practices spanning 2018 to 2021.
The mechanics of the trap
Instruments such as currency options, Target Profit Forwards, and contracts with embedded leverage are engineered in ways that render them nearly impossible for the average business owner to evaluate properly.
Complexity as instrument. A product presented as a “hedge” often contains multiplier clauses that, when exchange rates move unfavorably, oblige the client to purchase two or three times more currency than the business actually needs. The client learns of this only when summoned to top up collateral.
Information asymmetry. The bank possesses complete knowledge of the product’s structure, the historical volatility of the underlying instrument, and the probability of triggering various clauses. The client has marketing materials and an adviser’s verbal assurance that “the product is safe.”
Restructurings that generate fresh commissions. When a position begins producing losses, the bank calls with an “urgent” restructuring proposal. The new structure offers more favorable terms for the coming months while concealing dramatically worse parameters further out—and, of course, it generates additional fees.
Why the pattern repeats—and whether it is accidental
Regulatory fines, though large in absolute terms, remain modest relative to the profits these products generate. For an institution handling hundreds of billions in daily currency transactions, a penalty in the low hundreds of millions represents an acceptable cost of doing business—a line item in the operating budget, not a deterrent.
Consider the regularity of the cycle. The swap era (1997–2012), the structured-products era (2008–2014), the FX-manipulation era (2009–2019), the current era of TARFs and their cousins (2022–2025): each wave lasts several years, concludes with penalties and settlements, and is followed by the next—featuring the same institutions and the same operational playbook. It becomes difficult to avoid the impression that we are witnessing not a series of “incidents” but a recurring revenue model, one in which predictable client losses and predictable fines—relatively low, after all, compared with profits—are simply parameters in an economic calculation.
Within such a model, small and medium-sized enterprises make particularly attractive targets. Unlike retail customers, who in many jurisdictions now benefit from leverage limits and negative-balance protections, business owners often remain outside the scope of these regulations—even though their actual knowledge of derivatives differs little from that of any consumer. At the same time, they possess assets substantial enough to be worth pursuing, yet too modest to make years of litigation against a global financial institution economically rational.
What we do
Skarbiec Law Firm offers comprehensive support to businesses that have entered into unfavorable derivatives transactions or received demands for payment arising from them.
Transaction documentation analysis includes verification of whether the bank fulfilled its disclosure obligations under MiFID II, whether it assessed the product’s suitability for the client’s profile, and whether the documentation contains clauses that might support a claim of invalidity or unenforceability.
Assessment of legal grounds for claims considers the possibility of invoking defects in the declaration of intent (error, fraud), the doctrine of changed circumstances (rebus sic stantibus), breach of the bank’s professional disclosure duties, and conflict between contractual provisions and the nature of the legal relationship or principles of equity.
Negotiations with financial institutions—banks generally prefer settlement to the risk of public litigation. We have experience conducting such negotiations and understand which arguments financial institutions find most persuasive.
Preparation and conduct of court proceedings—when negotiations fail, we represent clients before the courts, building litigation strategy on documentary analysis, witness testimony, and expert opinions.
Asset protection against enforcement—where there is a risk that the bank will initiate collection proceedings, we assist in appropriate structuring of assets within the bounds permitted by law.
Types of instruments
Our practice encompasses disputes involving a broad spectrum of derivatives: currency options, currency and interest-rate swaps, forward contracts, Target Profit Forwards and Pivot TPFs, contracts for difference (CFDs), derivatives based on securities, indices, interest rates, and commodities, as well as more exotic structures tied to freight rates, emissions allowances, or inflation indices.
Next steps
If your business has entered into derivatives transactions whose terms give you pause, or if you have received a margin call or payment demand arising from such a transaction, we encourage you to get in touch. An initial review of the documentation will help determine whether grounds exist to challenge the obligation—and which steps to take first.
