Wells Fargo Accused of Aiding Elderly Investor Ponzi Scheme

Wells Fargo Bank NA was hit with a proposed class action alleging it aided and abetted a $300 million Ponzi scheme that duped more than 1,000 investors, most of whom were elderly and lost substantial life savings.

Well Fargo failed to stop the “scheme operators” from diverting funds meant to go the the proposed class members, motivated by a desire to “maximize assets held, and to generate account- and transfer-related revenue and compensation,” according to the complaint filed Tuesday in the US District Court for the Southern District of Florida.

The complaint alleges that National Senior Insurance Inc., doing busniess as Seeman Holtz, and its agents solicited and sold promissory notes that were offered by Para Longevity Investments LLC and related companies, and were secured by collateral in the form of life insurance policies issued to third parties, known as “Stranger-Originated Life Insurance.”

The companies involved in the scheme used Wells Fargo as their primary bank, lead plaintiff Fanny Millstein alleges.

The scheme operators promised investors that the proceeds from the death benefits of STOLIs would be used to make interest payments to the investors and eventually return their principal, Millstein alleges.

But “instead of properly using new investor money to fund premiums for new STOLI policies, the Scheme Operators took a substantial portion of those newly invested funds to pay existing investors, and further looted significant sums through improper, exorbitant, or fictitious fees and expenses,” the complaint says.

Wells Fargo also knew that many of the STOLIs that were meant to serve as collateral for the notes were “fraudulently pledged as security or transferred to other lenders” through the Centurion Insurance Group LLC and related entities, Millstein alleges.

Wells Fargo “provided substantial assistance and services in furtherance of the Scheme, including through its roles as Trustee, Securities Intermediary, and Depository Bank,” the complaint alleges.

Wells Fargo monitored the activities of the Para Longevity entities and knew the they “were being used to perpetrate the Scheme,” Millstein alleges.

But “rather than reporting or taking any action to stop this ongoing and ever-expanding fraud, Wells Fargo instead chose to substantially assist and profit from it,” the complaint says.

The complaint includes claims of aiding and abetting breach of fiduciary duty; aiding and abetting fraud; and unjust enrichment.

In addition to seeking class certification, Millstein seeks damages, civil penalties, pre- and post-judgment interest, and the return of income and fees retained by Wells Fargo.

Wells Fargo didn’t immediately respond to a request for comment.

Buckner + Miles, Silver Law Group, and Sallah Astarita & Cox LLC represent Millstein and the proposed class.

The case is Millstein v. Wells Fargo Bank NA, S.D. Fla., No. 24-cv-22142, complaint filed 6/4/24.