Newswise — Victims of one of the largest internet-based Ponzi scheme's in history alleged in an amended complaint filed in federal court in Washington, D.C. that a Bank of America branch manager worked directly for AdSurf, the fraudulent entity running the scheme. Both the branch manager and most of her staff were assigned to AdSurf's headquarters, a former floral shop in tiny Quincy, Florida. These Bank of America employees were paid more than other AdSurf employees. They supervised the collection, accounting, and depositing of millions of dollars in cash, cashiers checks and VISA transactions from victims across the United States.
AdSurf in total collected payments of over $400,000,000 from victims for so called "ad packages". These ad packages claimed to establish a right to earn significant returns for "surfing the internet". A federal judge in Washington, D.C. ruled earlier this year, however, that AdSurf was nothing more than a Ponzi scheme. Funds received by new participants for these ad packages were simply being used to pay earlier participants.
Nonetheless, this scheme grew rapidly, fueled by testimonials featured on YouTube and religious revival style rallies attended by tens of thousands in a number of large cities. AdSurf, founded by convicted felon Anthony Bowdoin, lacked any financial expertise or infrastructure to deal with the tremendous in-flow of monies or pay out of funds to participants. As the amended complaint explains, the substantial assistance provided by Bank of America enabled this Ponzi scheme to flourish.
While the manager and staff of Bank of America's branch in Quincy, Florida became intertwined in the Ponzi scheme, the amended complaint details, one of the bank's vice president's based in nearby Tallahassee visited AdSurf headquarters. After meeting with senior AdSurf management, she signed off on the relationship between the Bank and the Ponzi schemers, according to the amended complaint. This approval was granted, despite two local Quincy banks refusing to open accounts for Adsurf because of their suspicions regarding its business model.
"This reckless conduct by Bank of America is part and parcel of a banking culture that sadly put fees, profits and the stock price of the Bank, above compliance and sound risk management policies. Not only was one of our nation's largest financial institutions placing huge irresponsible bets on sub-prime mortgages and other risky and exotic financial product but also providing knowing assistance to sponsors of Ponzi schemes. The result was a bill to tax payers of $45,000,000,000 and counting. We hope our lawsuit helps victims obtain the return of their funds from Bank of America. Going forward, we will request that the Court is ordered to abide by recognized industry standards and government regulations imposed by anti-money laundering regulations and the Patriot Act. If respected, these laws, particularly since 9/11, place strict restrictions on a bank's ability to open accounts for suspicious entities, accept deposits and process payouts in the face of obvious red flags and thinly veiled illegal conduct," said Steven Berk, of Berk Law LLC based in Washington, D.C., Lead Counsel for the defrauded victims.
Indeed, the Bank's alleged conduct in this case is not unique and is strikingly similar to the support it provided to a Ponzi Scheme operated at around the same time in Long Island, New York by convicted felon Nicholas Cosmo. In that scheme Cosmo, through Agape, a company he controlled, purported to sell investors participations in high interest rate bridge loans. The fraud was that either the underlying loan did not exist or Cosmo unbeknownst to investors sold the same loan over and over again. Sadly, many of the defrauded investors were retired civil servants, police officers, and mail carriers who lost their entire retirement savings. According to the amended complaint filed in that proceeding pending in the United States District Court for the Eastern District of New York, Bank of America allowed Cosmo the run of the bank - by approving the opening of numerous accounts, in various names, and the extraordinary practice of allowing daily sweeps of those accounts into an operating account used and controlled by Cosmo to steal hundreds of millions of dollars from investors. Significantly, much like in AdSurf, the amended complaint alleges that a Bank of America employee was assigned to work directly for Cosmo at his offices to facilitate both the acceptance of funds and the pay outs to investors.
"It's rather astounding that Bank of America would allow such outlandish behavior to occur right under its nose. One clue that might explain this utter lack of scrutiny is information we obtained, as alleged in our amended complaint, that Bank of America had first cut back and then totally disbanded its compliance group for high net worth, "risky" accounts, like the ones used by Cosmo. If that decision was made, it starkly illustrates the priority of fees and profits above sound banking practices became ascendant at Bank of America," said Steven Berk, Co-Lead Counsel in the Cosmo Case (Sullivan vs. Bank of America).
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