How Bank of America and MF Global Figure Prominently into the Agape Ponzi Scheme

by Admin on March 26th, 2009 at 9:49 pm : Comments 003

My office is actively investigating the Bernard Madoff and Nicholas Cosmo Ponzi schemes. Although our investigations are not yet complete, we’ve already established substantial evidence that Madoff and Cosmo didn’t act alone – some major publicly-traded companies figure prominently in their schemes. I’ll post my Madoff findings shortly, but here is what we’ve uncovered so far about Cosmo’s Ponzi scheme.

As outlined in the class action lawsuit we filed today, we allege that Bank of America (NYSE:BAC), the nation’s largest bank, and MF Global (NYSE:MF), a major commodities futures trading firm, substantially assisted Cosmo’s fraud and played a major role in the loss of investor funds. The evidence is substantial that Bank of America and MF Global knew, or should have known, that Cosmo was committing fraud.

Cosmo is a convicted felon who after completing a nearly two year stint in federal prison founded Agape World, Inc., a Long Island company specializing in making short-term “bridge” construction loans carrying high interest rates. Through a network of about a dozen brokers, Cosmo gathered some $400 million from investors who wanted to realize the hefty rates of returns. Unknown to the investors, Cosmo re-sold the same interests hundreds, if not thousands, of times. Most of Cosmo’s investors were blue-collar workers with limited investment understanding or experience.  One of the plaintiffs we represent is seriously ill with stomach cancer and his wife just gave birth to a child.

As I’ve noted earlier, Agape’s marketing materials listed Bank of America as the company’s “banking agent,” but the “Bank of Opportunity” provided more than routine banking services on behalf of Agape.  We’ve learned that a Bank of America employee maintained an office at Agape’s headquarters which was some thirty miles from the West Hempstead branch where she was based.  The employee regularly cut checks at Cosmo’s behest and performed other functions normally associated with those of a personal assistant. The Bank of America employee had a bird’s eye view of Cosmo’s financial transactions and knew first hand that the substantial inflow of funds was coming from investors and that most of the outflows were used to subsidize Cosmo’s lavish lifestyle or pay off his brokers.

Cosmo also speculated heavily in commodities futures trading that resulted in more than $80 million in losses. Despite being a convicted felon and having been permanently banned by FINRA from the securities industry, Cosmo managed to open accounts at MF Global, where he did most of his trading, and other commodities firms.

MF Global isn’t known for its risk management and compliance. The firm last year suffered more than $140 million in losses because a trader made some ill-timed wheat-price bets that “substantially exceeded his authorized trading limits.” The company this week admitted at a UK trial to defrauding a former client after previously issuing repeated denials. It’s been reported that at least one MF Global rival refused to do business with Cosmo because he didn’t pass muster with the compliance department.

It will be interesting to see how Bank of America and MF Global publicly respond to our lawsuit.  On its website Bank of America proudly declares that “It is the policy of Bank of America to take all reasonable and appropriate steps to prevent persons engaged in money laundering, fraud or other financial crimes…” Given that Bank of America also figures prominently into another Ponzi scheme run by convicted felon Andy Bowdoin, I look forward to learning more about Bank of America’s supposed preventive measures.

As for MF Global, the company was quoted this week in connection with another fraud as saying that “MF Global’s corporate values require that all employees maintain the highest standards of ethics and integrity.  We have zero tolerance for anything but.” Apparently, opening an account for a felon convicted of securities fraud who was permanently banned from the securities industry doesn’t violate MF Global’s esteemed values.

Sadly, the SEC again has been found to be sleeping. The Agape wrongdoing was exposed by the U.S. Postal Inspection Service.  Underscoring the SEC’s chronic somnambulism, Agape’s website remains live where an application form is still prominently displayed.

Pleasant dreams, SEC.

Filed under SEC
and Agape World, Bank of America, MF Global