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US State and Federal Ponzi Lawsuits Raise Bar for Compliance Departments
By Daniel Bethencourt
printA recent bevy of civil complaints brought against financial institutions by victims of Ponzi schemes raises questions over the extent to which financial institutions can detect and prevent large scale fraud perpetrated by their own customers, say sources. In San Jose, California, attorneys for the victims of a $207 million Ponzi scheme known as "Traffic Monsoon" argued in a federal lawsuit this month that PayPal engaged in gross negligence, aided and abetted fraud and breached its fiduciary duty by allegedly failing to act on signs that a financial crime was taking place. The scheme was run by one Charles David...
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Add to the fallout of the largest-ever known Ponzi schemes another change to bank behavior: institutions are keeping more investigators tied to their desks in an attempt to identify big frauds.
Reading the documentation accompanying JPMorgan Chase's record $2.05 billion settlement for failing to report Bernie Madoff's suspicious transactions, one might reasonably ask how a fire with so much smoke could have burned for so long.
JPMorgan Chase will pay $2.05 billion for failing to share its suspicions that the performance of Bernard Madoff's hedge fund was too good to be true, prosecutors and the bank disclosed Tuesday.
U.S. financial regulators Monday fined Canada-based TD Bank $52 million for willfully failing to report suspicious transactions tied to one of the largest-ever known Ponzi schemes.
Plaintiffs suing Toronto Dominion Bank over its ties to a convicted Ponzi schemer will likely reject a proposed comprehensive settlement that would grant the institution immunity from future litigation, say attorneys.
Federal financial regulators are questioning TD Bank about potential Bank Secrecy Act compliance lapses identified in the wake of the conviction of Florida-based Ponzi schemer Scott Rothstein, say sources.
In the legal wrangling that inevitably follows the collapse of Ponzi schemes, banks often escape liability. But in at least three lawsuits settled against two banks in the past year, financial institutions have been asked to pay up, and substantially.
Hedge fund manager Bernard Madoff pleaded guilty Thursday to bilking investors out of $65 billion and laundering the money as part of a Ponzi scheme that dwarfed similar swindles.
The investigation into a $50 billion securities fraud by a former chairman of the Nasdaq stock market may mean more scrutiny for banks that took him as a client, according to a financial investigator.