TD Bank pays $52m over US Ponzi scheme

TD Bank pays $52m over US Ponzi scheme

TD Bank pays $52m over US Ponzi scheme

TD Bank will pay $52.5 million to settle US regulators' allegations that it failed to report suspicious activity in bank accounts tied to a $1.2 billion Ponzi scheme and lied to the investors.

The Office of the Comptroller of the Currency (OCC) assessed a $37,500,000 penalty against TD for violations of the Bank Secrecy Act while the US Securities and Exchange Commission (SEC) has reached a settlement of $15 million over related allegations involving the violation of securities laws. 

The settlements are in addition to $600 million the bank has paid as restitution to investors defrauded in the scheme, the OCC said.

“Financial institutions are key gatekeepers in the transactions and investments they facilitate and will be held to a high standard of accountability when their officers enable fraud,” said Andrew Ceresney, co-director of the SEC's enforcement division.  “TD Bank through a regional vice president produced false documents on bank letterhead and told outright lies to investors, failing in its gatekeeper role.”

In a statement to Wealth Professional, the bank said it considered the matter settled.

“These agreements resolve each agency’s concerns regarding TD’s customer relationship with Scott Rothstein, a Florida lawyer who perpetuated a multi-million dollar fraud,” the bank said. “TD Bank is pleased to resolve these regulatory concerns and to put the Rothstein matter behind us. TD works very closely with our regulators to ensure that it complies with all applicable laws and regulations."

The OCC said that from April 2008 to September 2009, the bank failed to file suspicious activity reports (SARs) on activity in accounts belonging to Rothstein Rosenfeldt Adler, a Ft. Lauderdale, Florida law firm through which Scott Rothstein ran a $1.2 billion Ponzi scheme.

The SEC charged TD Bank and former executive Frank Spinosa with violating securities laws in connection with the massive South Florida-based Ponzi scheme conducted by Rothstein, who is now serving a 50-year prison sentence.

The SEC alleged that TD Bank and its then-regional vice president Spinosa defrauded investors by producing a series of misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme. 

TD Bank agreed to settle the SEC’s charges in an administrative proceeding, without admitting or denying the SEC’s findings, and pay $15 million. The SEC filed a complaint against Spinosa in US District Court for the Southern District of Florida.

The SEC said Spinosa falsely represented to several investors that TD Bank had restricted the movement of the funds in these accounts when, in fact, Rothstein could transfer investor money however he desired.  Spinosa also orally assured investors that certain accounts held balances totaling millions of dollars, but each account actually held zero to $100, the SEC said.

“Spinosa played a key supporting role in Rothstein’s Ponzi scheme by providing false comfort to investors that their money was safe and secure in the accounts at TD Bank,” said Eric Bustillo, director of the SEC’s Miami regional office.  “He enabled Rothstein to con investors into believing he couldn’t move their money when he could, and that the bank was holding money that it wasn’t.”