Legal

Bank Of America Accused Of Aiding $102M Ponzi Scheme

Bank of America has been accused in a lawsuit of providing more than 100 accounts, used to carry out a $102 million Ponzi scheme. According to Bloomberg, the class-action suit, Heinert v. Bank of America, N.A., was filed in U.S. District Court, Middle District of Florida (Ocala) on behalf of people who lost money in the scheme.

The suit follows a recent complaint by the U.S. Securities and Exchange Commission (SEC), which alleged that five men and three companies defrauded more than 600 investors.

The brother and sister who filed the class action suit, looking to recover losses from their late father’s investment, claim the fraudsters “could not have perpetuated their scheme without the knowing assistance of their primary banking institution, Bank of America, which lent the scheme an air of legitimacy and provided critical support, including at times when the scheme would have otherwise collapsed,” according to the complaint.

Bank of America spokesman Bill Halldin had no immediate comment on the lawsuit.

The bank is accused of failing to spot suspicious activity, which included deposits of hundreds of thousands of dollars into accounts with relatively small, negative or nonexistent balances, as well as transfers within the same week to other accounts or investors seeking to cash out.

While the creators of the scheme promised they would put investor funds into profitable and, perhaps, dividend-paying companies, they instead spent $20 million from the investment pool to enrich themselves, according to the SEC complaint. In addition, they made $38.5 million in “Ponzi-like payments” and transferred most of the remaining funds away from the companies that were supposed to receive it.

Last year, a report found that Ponzi schemes are happening more often than people think they are, and it’s usually well-educated people with money who were the victims of Ponzi schemes. In just 2016 alone, Ponzitracker counted 59 Ponzi U.S. schemes, equaling $2.4 billion. It also claims the number of schemes has been similar over the past five years.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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