Newswise — A Complaint filed October 22, 2009 in Federal District Court in Tampa, Florida alleges that Bank of America was at the center of yet another Ponzi scheme. The operator of this scheme, 27 year-old Beau Diamond, defrauded hundreds of investors from Florida and around the country of at least $37 million. He claimed to be an experienced trader in off exchange foreign currencies. In truth, he had no such experience and was not registered to sell securities or trade foreign currencies for others.
Nevertheless, Bank of America, as alleged in the Complaint, accepted Mr. Diamond into its Premier Banking and Investment Division. According to the Bank’s promotional materials, as a Premier customer, young Mr. Diamond received “close personal attention,” “priority customer service” and “expertise in banking and investment services.” For all its Premier customers, the Bank required the completion of a detailed list of personal and financial disclosures. In industry terms, the Bank had a heightened duty to the standard of “know your customer”. Through this process and by providing Diamond with a range of banking services over a 32 month stretch, the Bank learned of the illegal conduct. They had the duty to shut down the Diamond accounts. They failed to do so. If the facts of the Complaint can be proven, they will be legally liable to defrauded investors; no differently than the liability of a “getaway driver” who is not just there by accident but has knowledge of the bank robbery even if he never enters the bank.
Steven N. Berk, Co-lead Counsel for the investors, explained that “the lifeblood of a Ponzi scheme is the ability of the scheme’s operator to claim legitimacy and have a banking facility that allows him to accept and distribute large sums of money from a significant number of individuals. Bank of America was critical in providing both. Without the active support and backing of, in this case, one of the nation’s largest banks, Ponzi schemers like Mr. Diamond would be relegated to using off shore banks and other dubious financial arrangements. Many investors would no doubt be scared away. But with a Bank of America on their side, these schemes can too easily metastasize.”
This matter is strikingly similar to at least 3 other cases filed around the country where Bank of America has been alleged to have had actual knowledge of, and provided substantial support to, Ponzi schemes. In all of these cases, the schemes originated and operated out of small Bank of America branches; where the sheer size and number of deposits made by the organizers of the scheme would have been so outside the norm that they could not have been missed.
In this case, the branch had only 5 employees located in Siesta Key Florida. “It defies common sense to believe that those employees would not have known Diamond was engaged in some type of illegal enterprise. He was under 30, had no business experience, no securities licenses, and no employees. Yet he amassed nearly forty million dollars from hundreds of individuals and in many cases quickly wired that money off shore, or spent the money on personal luxury items and gambling.”
Berk also noted that “Bank of America’s support of several Ponzi Schemes (where innocent investors lost hundreds of millions) appears unfortunately all too consistent with other questionable types of conduct by the Bank. Indeed, in one of the three other Ponzi schemes it has been alleged that Bank of America shut down a critical internal compliance division in the face of complaints by officers of the Premier Banking division who were losing customers because compliance standards were too rigorous. This aggressive behavior by our nation’s largest bank can be seen in other circumstances such as the Bank’s failure to advise its shareholders of $6.5 billion dollars paid in bonuses to Merrill Lynch executives after being bought by the Bank (a case being prosecuted by the SEC). This case is another direct example of the harm that can be caused when Bank of America’s culture places profits over compliance.”
Berk Law is working on this matter with the Florida firms of Randall Smith of Lakin & Smith and Andre Perron of Ozark, Perron & Nelson, P.A.
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