Third-Party Liability in Action
See, now this is what we’ve been talking about with third-party liability. Here’s a great story about a scammer, a Ponzi schemer who took $300 million from victims in Canada. What happened was the victims discovered that a bank had made this easier for the scammer. Now, the bank allegedly wasn’t part of the scam directly, but many times when a scammer, Ponzi schemer, or online fraud perpetrator does something to take money from victims, they have to use a bank or use other professionals, whether it’s an accountant, an attorney, advertising companies, or different types of professional consultants. Many times those professionals, while they’re not really aware directly of the scam, should know better and sometimes they break their own rules.
The Bank’s Alleged Oversight Failure
In this case, the investors have sued a bank, Royal Bank of Canada, because they’re alleging that they lost money because the bank did not do proper oversight on this enterprise. When banks have certain rules like KYC (know your customer) or certain documents they need to file, if the bank gets lazy or sloppy and doesn’t do it, many times that allows the scammer to extend their fraud—to run it longer, get away with more things, and have more victims.
How Third Parties Can Help Recover Losses
So, in most large-scale Ponzi schemes or online frauds, a lot of the money that comes back to victims comes from third parties. In this case, the parties are trying to get it from a bank, which is not uncommon. According to this lawsuit, the plaintiffs allege that the Royal Bank failed to detect or prevent misconduct despite having clear regulatory duties. The scheme was unchecked for years, resulting in massive avoidable losses.
Red Flags Ignored
The lawsuit states that there were several red flags, including high-volume deposits inconsistent with a mortgage broker. That’s what many times the claim is against a third party—if it’s a bank, it’s obvious that this account is not being used for a legitimate purpose because of the pattern. How many times have you gotten an email from your bank saying, “Hey, there’s a suspicious credit card charge or a suspicious check,” and they call you to verify it? They do this all the time. If they don’t do it with a Ponzi scheme, they could have liability.
The Importance of Investigating Third Parties
So if you are a victim of a scam, you want to look at third parties and make sure your investigation—if we do an investigation, we look for this—make sure that your investigation is looking for potential third parties. It’s not guaranteed, but there are potential third parties that you might want to look at for liability to get some of your money back.
