Chang, et. al. v. Interactive Brokers LLC (“IB”) was filed in the Northern District of California on August 2, 2021. The complaint seeks civil damages for claims of aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violation of California Business and Professions Code.
Plaintiff seeks to represent a class of investors of Haena Park, an IB customer that operated a Ponzi scheme. The defendant, IB, is an electronic brokerage subsidiary of IBG LLC and is registered as a broker-dealer with the SEC and as a futures commission merchant with the CFTC.
Park solicited $23 million in investments from friends and family between 2010 and 2016. Park promised investors that she would deposit their funds in futures and forex investment devices and would manage the investments. Park represented that she had successfully invested in forex before and expected gains of up to 50%. In reality, Park’s IB accounts lost money nearly every month. Park produced sham statements to hide losses and used new investor funds to pay old investors in classic Ponzi fashion. Park also used investor funds to pay her own personal expenses.
Park was sentenced to three years in prison in 2018. In 2020, the SEC, FINRA, and the CFTC simultaneously announced a joint action against IB for its role in the fraud and other compliance failures under the Bank Secrecy Act and required IB to pay millions of dollars in fines. The complaint notes that this was the first time in the CFTC’s history it brought such charges against a registered merchant and the first joint enforcement action by the CFTC, SEC, and FINRA.
The complaint alleges that although IB knew Park was defrauding investors, it chose to profit from – rather than expose – the scheme. Indeed, in support of his aiding and abetting claims, Plaintiff alleges that IB learned of Park’s scheme in the course of performing its customer due diligence obligations, and that IB deviated from its standard compliance protocols and covered up red flags so Park’s scheme could continue. Plaintiff seeks actual and punitive damages for IB’s role in perpetrating Park’s scheme under theories of aiding and abetting fraud and breach of fiduciary duties and violation of California statutory law.