Associated Bank Sued For Facilitating $194 Million Ponzi Scheme

The court-appointed receiver for Trevor Cook's $194 million Ponzi scheme filed a lawsuit against banking behemoth Associated Bank (the "Bank"), alleging that the Bank played a key role in the success of Cook's scheme and providing an aura of legitimacy.  R.J. Zayed, the court-appointed receiver for Cook's scheme, filed a heavily-redacted complaint today against the Bank, which is popular in northern states such as Wisconsin, Illinois, and Minnesota.  Zayed alleges the Bank "knowingly aided and abetted one of the largest Ponzi schemes in Minnesota's history" by ignoring a multitude of red flags that should have prompted an investigation.  

The Bank faces charges of aiding and abetting fraud, aiding and abetting breach of fiduciary duty, aiding and abetting conversion, and aiding and abetting false representations and omissions.  Zayed is seeking a jury trial, and alleges that the Bank's assistance allowed Cook's scheme to take in over $79 million.

Cook, along with several co-conspirators, pitched Crown Forex, SA ("Crown Forex") to potential investors as a risk-free foreign currency trading program that promised guaranteed 10% annual returns.  Cook later contacted Bank officials to discuss opening an account in the name of Crown Forex in order to receive investor funds.  According to Zayed, what followed was a pattern of "atypical banking activities" that, combined with other circumstantial evidence, represented actual knowledge by the Bank of Cook's scheme that was ignored in favor of the lucrative business brought in by Cook's scheme.  This included:

  • Servicing of the Crown Forex account despite lacking the required Secretary of State documents;
  • Transferring funds between the Crown Forex account and Cook's personal account, and in one instance allowing Cook to stuff $600,000 in cash in a box to allegedly go buy a yacht,
  • Not a single penny being transferred from the Crown Forex account held in Switzerland, as originally promised, and instead only the repeated transfer of millions of dollars between Cook's personal account and other co-conspirator accounts; and
  • Numerous suspicious transfers that should have triggered the Bank's obligations under anti-money laundering policies or the Bank Secrecy Act.

Roughly half of the factual and legal allegations in the complaint are redacted.  Zayed also points to the fact that the Bank recently entered into a Consent Order with the Comptroller of the Currency of the United States of America stemming from its failure to comply with Bank Secrecy Act requirements and anti-money laundering procedures.  

Along with alleging that the Bank was responsible for at least $79 million flowing through the Crown Forex account, Zayed is also seeking punitive damages, civil penalties, and pre- and post-judgment interest.  

A previous suit brought by several of Cook's victims was dismissed in Aoril 2010 after a state judge found that the Bank had no duty to non-customers.

A copy of the complaint is here.