Banks and Ponzi Schemes

by Jacob Zamansky on May 25th, 2010 at 11:05 am : Comments 000

I’ve said it so many times it’s almost becoming a mantra: It’s virtually impossible to carry out a major Ponzi scheme without the complicity of a large bank.  The receiver that was court-appointed to recover what’s left of Danny Pang’s billion-dollar investment fraud has provided the latest proof.

According to the receiver, HSBC Bank gave Pang the patina of legitimacy by allowing his firm to issue so-called net-asset-value reports on HSBC letterhead that were false.  Some of these statements were even signed by an HSBC official.  The receiver is seeking to recover from HSBC nearly $2 million in fees and unspecified damages.

Bank of America figures prominently in Ponzi schemes in Florida and Long Island and allegations have emerged that JP Morgan Chase may have abetted Bernard Madoff’s Ponzi scheme. Unfortunately, a 2007 Supreme Court decision known as Stoneridge makes it considerably more difficult to hold third-parties legally culpable for fraudulent schemes.

Senator Arlen Specter (D-PA) last July sought to pass legislation to remedy the Supreme Court decision, but the bill died a near instant death.  The Financial Reform Bill provides no legal avenue to offset the Stoneridge decision. Sadly, Specter last week lost the Democratic primary. Such is the fate of one of the few politicos willing to stand up to Wall Street.

Filed under Uncategorized
and banks, Danny Pang, Investment Fraud, large financial institutions, Ponzi Schemes