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Wells Fargo Says Ponzi Victims Failed to Show Bank Knew of Ploy

Aug. 5, 2022, 5:03 PM

Wells Fargo & Co. is asking a Nevada federal judge to dismiss claims brought by victims of a lawyer-led Ponzi scheme, arguing the investors didn’t show the bank knew of the scam.

The victims “wholly omit the most crucial allegations of the ‘who, what, when, where, and how’ of Wells Fargo’s knowledge of the fraud,” the bank’s lawyers at Holland & Hart wrote in a motion Thursday.

The motion comes in a high-profile case where investors provided nearly $500 million to a scheme run out of a special bank account for lawyers. One alleged perpetrator, Nevada lawyer Matthew Beasley, who FBI agents shot and injured during a standoff this year, is claimed to have told the victims he was investing their money in personal injury settlements but instead is accused of paying his firm with it.

Some of the investors allege that the bank aided and abetted the fraud.

They claim that when Beasley opened his account in 2017, he told the bank he would earn about $350,000 a year. Instead it brought in $30 million in February alone. Beasley paid his firm more than $17 million from it over roughly four years, investors allege.

Wells Fargo’s sophisticated software to track suspicious activity and a bank employee who raised concerns about the account should have been enough to alert the bank of trouble, the investors claim.

But the bank in its motion characterized Beasley’s activity as “ordinary banking transactions” and said the fact the fraud allegedly occurred in a lawyer trust account made no difference.

The bank said transferring money to title companies as Beasley’s account routinely did is permissible for the type of account known as an “interest on lawyer’s trust account.”

“Wells Fargo had no reason to be suspicious,” the bank’s lawyers wrote.

McGuireWoods also represents Wells Fargo in the case.

The case is In Re: J&J Investment Litigation, Nev. Dist. Ct., 22 00529, 8/4/22.

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com