Saturday, 26 July 2014
Last updated 13 hours ago
Feb 10 2012 | 2:43am ET
Taking a page from the less-than-wholly-successful playbook of fellow court-appointed receiver Irving Picard in the Bernard Madoff Ponzi scheme, Burton Wiand has sued a major bank for allegedly abetting the Arthur Nadel hedge fund fraud.
In a complaint filed yesterday, Wiand accused Wells Fargo of being "essential" to Nadel's $168 million Ponzi scheme. According to Wiand, Wachovia—acquired by Wells Fargo in 2008, just before Nadel's scam collapsed—allowed Nadel to set up shadow bank accounts for a decade, giving him the ability to siphon funds into his own accounts or those of his alleged partners.
"The bank turned its back on its responsibility under the law and allowed Nadel free rein to steal this money," Wiand lawyer Terry Smiljanich wrote. "He robbed these innocent victims blind, in some cases taking their entire life savings."
"Indeed, the ability to commingle funds across multiple accounts was a key element in the continuation and longevity of Nadel's fraud," Smiljanich wrote.
Smiljanich went on to question Wachovia's investment of $550,000 in two of Nadel's Scoop Management hedge funds. The bank redeemed $425,000 in profits just two months before the scheme fell apart. Although it has since handed that money over to Wiand, "it's awful suspicious they were able to pull this substantial amount of money right before it collapsed," Smiljanich told the Sarasota Herald-Tribune.
The lawyer also criticized Wachovia and a former vice president at the bank, Timothy Best, for missing or ignoring "clear indications of money-laundering activities."
Smiljanich said that Wiand would seek whatever portion of the $168 million lost in the scheme not otherwise recovered from Wells Fargo.
Nadel, who pleaded guilty to fraud, is serving a 14-year prison sentence.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…