TD Bank Helped Billion Dollar Ponzi Scheme, Fined $67 Million
A federal court has found that a TD Bank in Toronto must pay an investment group $67 million for its role in a $1.2 billion Ponzi scheme.
The lawsuit, filed by the Corpus Christi, Texas investment group, Coquina Investments, was the first of several pending lawsuits set in motion by angry investors, according to The Sun Journal.
The lawsuits are in response to a lucrative Ponzi scheme operated by Scott Rothstein, a disbarred attorney.
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Rothstein was once considered a prominent South Florida attorney, but is now serving a 50-year prison sentence after pleading guilty to running a scam, which involved investments in phony legal settlements.
Rothstein allegedly told investors that they were buying stakes in fictitious sexual and employment discrimination settlements that his law firm was handling.
According to testimony and court documents, Rothstein used a TD Bank branch as a vital part of his billion-dollar scheme. Co-conspirators in the case, allegedly posed as TD Bank employees and one of them even created a fake TD Bank Website with fake account balances to dupe investors.
TD Bank spokeswoman Rebecca Acevedo said that blame for the scheme should only be placed on Rothstein and that TD Bank would explore its legal options.
The attorney for the Coquina investors, David S. Mandel, said that the jury in the case sent exactly the right message to TD Bank.
He asked for $32 million in compensatory damages and $140 million in punitive damages, according to Bloomberg News.
"This bank was integral to the fraud, and the fact is that it could have not succeeded without their active participation in the Ponzi scheme," Mandel said.
Mandel claims that key TD Bank employees knew of the fraud and assisted Rothstein in assuring investors that their money was safe. Rothstein said that he gave former TD Bank vice president, Frank Spinosa over $50,000 to ignore clear signs of illegal activity.
Mandel, during the trial, cited letters where Spinosa said Rothsteins' account was locked and it could only be accessed by the Coquina investors, according to a Bloomberg report.
Spinosa took the stand during the trial and cited his Fifth Amendment right not to be forced to incriminate himself.
William Scherer is also suing TD Bank on behalf of another investment group that lost $180 million.
"The facts in this case and the facts in our case are the same, just with different plaintiffs," Scherer said. "The evidence in this case will come in our case."
Rothstein, 49, was once part of the South Florida law-firm, called Rothstein Rosenfeldt Adler. He is reportedly cooperating extensively with federal prosecutors and has boasted about paying bribes to politicians, judges and law enforcement officials. He also raised thousands of dollars for the campaigns of local and national politicians.
According to Avecedo, TD Bank will continue to defend itself against claims of wrong-doing.
