A federal judge said on Wednesday the U.S. government can proceed with a lawsuit accusing Bank of New York Mellon Corp of overcharging clients for trading currencies, a case brought under a rarely-used financial fraud law.

While dismissing some of the fraud claims, U.S. District Judge Lewis Kaplan in Manhattan said the complaint “generally suffices” to let the government pursue its main claim, that the bank fraudulently misrepresented that it would provide “best execution” to various trading clients.

The ruling marked a significant victory for the U.S. Department of Justice, which had sought to use a powerful law adopted in the wake of the savings and loan scandals of the 1980s to bring civil fraud cases against Wall Street banks.

The law, the Financial Institutional Reform, Recovery and Enforcement Act of 1989 (FIRREA), provides for a low burden of proof, strong subpoena power and a 10-year statute of limitations. It had not been applied much until recently.

The Justice Department has asserted the law in mortgage-related cases pending against Bank of America Corp and Wells Fargo & Co. Those banks have sought to dismiss the claims filed under the law on grounds similar to BNY Mellon.

Under the statute, the government may pursue civil penalties against anyone who commits a fraud that is “affecting a federally insured financial institution.” BNY Mellon contended the law shouldn’t apply when the only financial institution affected was itself.

Judge allows claims under S&L crisis-era law to proceed

In an 81-page opinion, Kaplan rejected that argument, saying that where a financial institution’s fraud harms itself in the process, “it is entirely consistent with the text and purposes of the statute to hold the institution liable for its conduct.”

“If anything, the urgency may even be greater when the fraud allegedly pervades an institution that the government has backstopped,” he wrote.

Adam Lurie, a former senior official at the Justice Department, now at Cadwalader Wickersham & Taft, said the ruling will make the Justice Department more confident in pursuing cases under FIRREA.

“However, they must be mindful that the decision is still subject to review at the appellate level, and the issue is still unsettled at that level,” he added.

Filed in 2011, the Justice Department’s lawsuit accuses BNY Mellon of scheming from at least 2000 to defraud custodial customers of its foreign exchange services.

The lawsuit claims BNY Mellon misled clients about how it arrived at its foreign currency exchange rates for certain transactions.

BNY Mellon entered into a partial settlement in January 2012, agreeing to change disclosures regarding its foreign exchange services.

The damages claims continued. The lawsuit seeks an unspecified amount of penalties.

On the merits of the case, Kaplan said on Wednesday the complaint sufficiently alleged its principal claims that it took steps to actively mislead clients about how foreign currency trades were priced.

He also said the complaint sufficiently alleged fraud claims against an individual defendant in the case, David Nichols, the head of products management at BNY Mellon.

Stephen Fishbein, a lawyer for Nichols at Shearman & Sterling, declined comment.

Kevin Heine, a spokesman for BNY Mellon, said the bank was “pleased that the court dismissed a number of the claims advanced by the government.”

The judge dismissed some claims in the lawsuit to the extent it alleged BNY Mellon made misrepresentations by saying it minimizes costs or provides the “best rate of the day,” among other claims.

“We look forward to addressing the remaining claims before the court,” Heine said.

A spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office filed the case, declined comment.

The case is United States v. Bank of New York Mellon, U.S.District Court, Southern District of New York, No. 11-06969.