November 13. 2020 – Heinert v. Bank of America, N.A., 2020 WL 6689287 (2d Cir.)

On November 13, 2020, the United States Court of Appeals for the Second Circuit issued an opinion in Heinert v. Bank of America, N.A. imposing a heavy pleading burden upon plaintiffs seeking to sue banks for the facilitation of a Ponzi scheme.

As the recession deepens, Ponzi schemes that benefitted from a thriving pre-pandemic economy are likely to collapse. While investors may pursue claims against the fraudsters themselves, these suits are unlikely to yield meaningful recovery as Ponzi schemes are frequently operated by judgment-proof shell entities. As a result, investors may look to deep-pocketed financial institutions to recoup their losses. Indeed, banks are a frequent target of Ponzi-scheme related aiding and abetting claims. These claims can present significant exposure risks to banks if they survive a motion to dismiss. Heinert shields banks from some of those risks by setting a high bar for pleading a key element of an aiding and abetting claim—actual knowledge of the underlying scheme.

Continue Reading… Second Circuit Rejects Ponzi Scheme-Related Facilitation Claims against Bank