Lawsuit Filed Against Wachovia for Failing to Detect Ponzi Scheme

A lawsuit has been filed on behalf of investors in a Ponzi scheme in Palm Beach County, Florida against Wells Fargo. Global Bullion Exchange was a company purportedly set up to allow investors to purchase precious metals which would be held in secure locations on behalf of that investor. Jamie Campany, the company’s former owner, is currently serving a 12 year prison sentence after admitting that none of the metals were ever bought. Instead, in classic Ponzi scheme fashion, old investors were simply being paid back out of investments from new investors. Altogether, over 1,400 investors got involved in this scam before it finally fell apart.

A Florida court appointed attorneys in 2010, following the bankruptcy filing of Global Bullion Exchange, to act on behalf of these investors and attempt to recover funds to cover some or all of the losses. To date, this has resulted in judgments nearing $5 million, but only having collected around $100,000 of that. It is very common following Ponzi schemes or other fraudulent investment scams that many or all of the parties involved become “judgment-proof,” which means that, although they have legal liability, they simply don’t have the money or other assets to pay off any judgment that a court might grant. As a result, it can be very difficult to actually recoup the losses in a meaningful way.

In this instance, the receiver has turned to what is likely one of the only potential defendants with any substantial assets to try to recover these investors’ losses: Wachovia Bank. Campany, on behalf of Global Bullion Exchange, did his corporate banking at Wachovia Bank, which is now Wells Fargo. According to the complaint filed, Wachovia should have been alerted to potential fraudulent or other illegal activity as a result of substantial irregularities in the deposits and withdrawals being made.

Under federal law, any transaction for $10,000 or more is required to be reported as part of anti-money-laundering legislation. Apparently, Campany made regular deposits and withdrawals of just under that amount in order to avoid those reports being generated. However, banks are supposed to be on the alert for patterns of activity that appear to be designed to avoid federal oversight, as these appear to have been. In another instance, the receiver claims that Campany walked into Wachovia and withdrew $950,000 in cash in a single visit from corporate accounts.

Eventually, Wachovia terminated its relationship with Global Bullion Exchange when Campany deposited two checks for a total of $2 million which did not clear. Nonetheless, the lawsuit claims that Wachovia provided “substantial assistance” to Global Bullion Exchange, without which the Ponzi scheme could not have begun and/or would have been discovered and stopped much sooner.

These charges come on the heels of other problems Wachovia has had for failing to detect and prevent illegal activity. In 2010, Wachovia agreed to pay roughly $160 million in fines and penalties after the U.S. federal government alleged that Wachovia did not have in place a sufficient anti-money laundering program. The resulting porous oversight permitted huge amounts of drug money to pass through the bank.

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