The Expert Podcast

• End of 2022 saw major developments in large-scale Ponzi schemes and scams, with FTX as a notable example alongside others.
• We've often discussed how victims can recover money from scams—even if the scammer spent or lost all the principal—by pursuing third parties involved.
• This episode highlights a recent case where investors won the right to recover funds from a bank tied to a customer's Ponzi scheme.
• The customer ran a Ponzi scheme using an account at Umpqua Bank, which was unaware of the fraud but failed in proper account management.
• Due to the bank’s inadequate due diligence and oversight, it may now be liable for paying back victims, despite the scammer’s misappropriation of funds.
• Investigations often focus on third parties with potential liability, including banks, accountants, attorneys, sales companies, and advertisers.
• In this case, investors lost $300 million in a Ponzi scheme linked to a depositor of Umpqua Bank.
• A U.S. District Judge denied the bank’s motion to be excluded from the case and certified it as a class action, allowing all investors to join together.
• Investors claim the bank “aided and abetted” the scam by enabling the scammer’s account without sufficient fraud detection.
• The bank’s own fraud detection software issued 146 alerts on suspicious activity tied to the scam company at the Nevada branch, indicating the bank had advance knowledge.
• Likely, no one at the bank properly investigated or acted on these alerts, which allowed the scam to grow.
• If you are a victim of fraud or Ponzi schemes and the scammer is unreachable or insolvent, third party liability may be your best chance at recovery.
• Insurance companies or other third parties sometimes have liability coverage to pay investors’ claims.
• While not legal advice, investigations frequently find third party sources as a route to help victims recover lost funds when scammers cannot pay back.
• In this example, Umpqua Bank’s potential liability could help make investors whole again.