According to a lawsuit that was filed on Jan. 8, City National Bank was involved in an ATM investment Ponzi scheme that was run by two California residents. The two individuals involved, ages 75 and 77, were both sentenced to federal prison for their roles. The lawsuit alleged that the bank assisted the scheme by bringing in investors and keeping fictitious checks from bouncing.
The two residents running the scheme reportedly sold ATMs through their company for about 15 years to their investors. They allegedly told these investors that they would receive 20 percent in annual returns and 50 cents for every transaction that was made. The investors reportedly never received their machines. The men used the $125 million that they made to pay the 20 percent return to some of the already existing investors. Both pleaded guilty to associated charges in January 2015.
The complaint stated that there are certain procedures that should be followed to detect ATM investment scams. The bank did start to monitor the’ company in 2005 but never reported the activities. Even further, the complaint alleged that representatives actually spoke to potential investors in the company. As a result, the plaintiffs were reportedly seeking class certification and compensation for damages.
While this particular case is a civil action, criminal fraud charges are taken very seriously and can result in severe consequences. Companies that are found to be guilty of fraud can end up having to pay thousands or even millions of dollars in fines, penalties, and compensatory and punitive damages. A criminal defense attorney may work with the accused company or any of its executives who have been charged to gather evidence that shows that the proper steps were taken to prevent the alleged fraud.
Source: Courthouse News , “Bank in on ATM Ponzi Scheme, Investors Say“, Rebekah Kearn, Jan. 11, 2016