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Ponzi scheme case ends in $17.4 million judgment

It has taken seven long years, but the victims of a precious metals Ponzi scheme may finally be able to recover some of their lost investments now that the court has entered a $17.4 million judgment against the investment company’s founder for breaching his fiduciary duty to his investors.

The founder of Global Bullion Exchange LLC is already serving a 12-year prison sentence for his crimes. His company persuaded more than 1,400 investors, many of the elderly, to invest in precious metals. However, the company didn’t actually purchase any precious metals for their clients — instead, it used money from new investors to pay dividends to old investors, fooling them into believing them that the company was flourishing.

The company itself was liquidated when the Ponzi scheme came to light — but it wasn’t the only defendant that investors sued. A 2013 lawsuit against Wachovia Bank (which is now owned by Wells Fargo) alleged that the bank should have spotted the red flags that indicated potential fraud was happening.

For example, the man personally made 287 cash withdrawals from the bank, totaling almost $2.5 million. $950,000 was removed from the business account in just one visit. This should have triggered alerts because anti-money laundering regulations require transactions over $10,000 to be reported to federal authorities. The lawsuit claimed that Wachovia was essentially complicit in the Ponzi scheme because it either knew what was happening because it was monitoring the accounts properly — and did nothing to stop the fraud — or it wasn’t monitoring the accounts like it was required — which allowed the fraud to continue.

Six months ago, Wells Fargo reached a private settlement agreement on the issue. That left only the judgment against the owner’s personal assets to be decided before investors can begin to recover any of their losses.

Even with all of these judgments and settlements, it’s hard to say how much investors will actually recover. Authorities say that precious metal fraud (which includes previous gems fraud) is extremely common. It’s successful, especially in politically turbulent times, because previous metals are seen as a lasting investment that won’t devalue the way a national currency might.

If you suspect that the individual or company handling your investments is looking out for his or her own best interests, not yours, a business litigation attorney can provide guidance on your options.

Source: Daily Business Review, “$17.4M Judgment Caps Long-Fought Ponzi Scheme Litigation,” Celia Ampel, April 18, 2017