Plaintiff Surefire Dividend Capital, LP (“Plaintiff”) filed Surefire Dividend Capital, LP v. Industrial and Commercial Bank of China Financial Services LLC in the Supreme Court of New York for the County of New York on April 15, 2021, claiming at least $46,598,676.84 in money damages, along with its costs and attorneys’ fees. Specifically, the complaint alleges claims for aiding and abetting fraud and aiding and abetting breach of fiduciary duty against Defendant Industrial and Commercial Bank of China Financial Services LLC (“ICBC”).
Plaintiff is an entity investor in Broad Reach Capital, LP (“Broad Reach”)—a purported hedge fund allegedly turned Ponzi-scheme ran by Brenda Smith (“Smith”). The defendant served as the clearing broker for Broad Reach, maintained several accounts on behalf of Broad Reach, and allowed many transfers from the Broad Reach accounts to other accounts controlled by Smith, both internally and externally.
To entice investors to invest in Broad Reach, Smith told investors that Broad Reach would utilize a specific trading strategy known as dividend capture trading. This strategy, according to Smith, yielded double digit returns and had an 85% hit rate, meaning that 85% of dividend capture trades made money. In reality, Broad Reach was not using the dividend capture trading strategy, nor was it making any trades at all. Instead, Smith was simply transferring money from investors between Broad Reach accounts and other entity accounts that she owned to give the appearance of liquid investments, though no actual returns were generated.
Plaintiff’s Complaint alleges that Defendant ICBC knew or should have known that this fraud was taking place, did nothing to stop it, and actually facilitated its occurrence. Plaintiff alleges several “red flags” that should have put ICBC on notice of Broad Reach’s Ponzi nature, including the voluminous large, round number transfers that occurred frequently to and from Broad Reach’s accounts. Moreover, Broad Reach’s deposits in its ICBC accounts frequently matched its withdrawals on any given month, highlighting the accounts’ fraudulent nature according to Plaintiff. Despite red flags, ICBC never investigated Broad Reach’s accounts to determine their fraudulent nature and close the accounts. Instead, ICBC allowed Plaintiff to invest more than $46 million in Broad Reach before the scheme crumbled upon Smith’s arrest for wire fraud and securities fraud.
Plaintiff seeks to recover its investments in Broad Reach, totaling $46,598,676.84. Plaintiff further seeks its costs and attorneys’ fees associated with filing the suit.