Several Hedge Funds to Sue Big Banks for Role in Tom Petters Ponzi Scheme
Six hedge funds are seeking to sue JP Morgan Chase, Bank of America, Wells Fargo, and other banks for their role in a $3.65 billion Ponzi scheme.
The hedge funds claim that they lost a combined $177 million to Tom Petters, the Minnesota-based CEO who was convicted for the fraud and sentenced to 50-years in prison in 2010. The banks, the hedge funds allege, aided and abetted Petters's crimes by allowing him to establish "suspicious accounts." UBS, the CIT Group, and PNC Bank are also among the defendants.
According to the complaint, filed in New York County Supreme Court and first reported on Tuesday by Courthouse News Service, Petters repaid the banks' loans with money from his scheme's victims even after the banks "knew that Petters and his entities, including Polaroid, were insolvent and/or not able to pay their debts."
Petters ran his Ponzi scheme from 1998 to 2008. His investors, including the hedge funds, believed they were funding a wholesale retail business, mainly electronics that Petters Company Inc. supposedly resold to big-box stores like Costco and Sam's Club. But Petters had been faking the product orders.
Federal agents arrested him in September 2008. The following December a jury found him guilty of 20 counts of money laundering, mail fraud, wire fraud, and conspiracy.
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