McGuireWoods’ Ponzi Litigation team launched its Ponzi Perspectives blog in early 2021. Since that time, we’ve posted detailed case alerts of Ponzi-related complaints filed throughout the country and posted key decisions that have the potential to influence controlling law on Ponzi-related issues involving financial institutions. This 2022 year-end round up summarizes the cases and opinions analyzed
Aiding and Abetting
Notable Litigation – January 2023
Notable litigation filed during January 2023 includes: (1) SEC v. Engel; (2) Firestone, et al. v. Residential Properties Resources Fund II, LLC, et al.; (3) Ellusionist Cash Balance Plan and Trust, et al. v. Spiegel Accountancy Corp., et al.; and (4) SEC v. Ellison-Meade.
SEC v. Engel, Civ. No. 2:23-cv-00213-PA-JPR…
Pennsylvania Supreme Court Recognizes a New Cause of Action Against Those Who Aid and Abet Fraud
With a new decision settling the issue, businesses run the risk of being held liable for the conduct of their customers with the potential for increased Ponzi scheme related litigation following the Pennsylvania Supreme Court’s approval of a cause of action for aiding and abetting fraud. …
Continue Reading Pennsylvania Supreme Court Recognizes a New Cause of Action Against Those Who Aid and Abet Fraud
New Complaint – Damian as Receiver of Today’s Growth Consultant, Inc. v. Core Financial Outsourcing of Chicago, LLC
On August 31, 2022, Plaintiff Melanie E. Damian, in her capacity as the Court-Appointed Receiver for Today’s Growth Consultant, Inc. d/b/a The Income Store (“TGC”) (the “Receiver”) filed a complaint against Defendant Core Financial Outsourcing of Chicago (“Core Financial”) in the Northern District of Illinois (“Damian II”) seeking damages, injunctive relief, interest, and attorneys’ fees and costs. The complaint alleges five claims for professional negligence, aiding and abetting breach of fiduciary duty, unjust enrichment, and two violations of the Illinois Uniform Fraudulent Transfer Act.
This action stems from a prior enforcement action seeking civil penalties and injunctive relief filed by the Securities and Exchange Commission (“SEC”) against TGC and its founder, Kenneth D. Courtright, III (“Courtright”), based upon TGC and Courtright’s alleged violation of federal securities laws and operation of a website services Ponzi scheme.
We previously wrote about PLB Investments LLC et al v. Heartland Bank and Trust Co. et al., a related case initiated by various defrauded investors of TGC against two bank defendants that …
Continue Reading New Complaint – Damian as Receiver of Today’s Growth Consultant, Inc. v. Core Financial Outsourcing of Chicago, LLC
Ponzi Perspectives: 2022 Midyear Roundup
McGuireWoods’ Ponzi Litigation team launched its Ponzi Perspectives blog in early 2021. Since that time, our focus is to track key cases and decisions that have the potential to influence controlling law on Ponzi-related issues. The blog also offers analysis on practical considerations when defending Ponzi litigation. This 2022 mid-year round up summarizes the new…
New Complaint – Damian, as Receiver of Today’s Growth Consultant, Inc. v. SmithAmundsen, LLC
On May 27, 2022, Plaintiff Melanie E. Damian, in her capacity as the Court-Appointed Receiver for Today’s Growth Consultant, Inc. d/b/a The Income Store (“TGC”) (the “Receiver”) filed a complaint against Defendant SmithAmundsen, LLC (“Defendant”) in the Northern District of Illinois seeking damages, restitution, interest, and costs. Specifically, the complaint alleges two claims for legal malpractice and aiding and abetting breach of fiduciary duty.
This action stems from a prior action filed by the Securities and Exchange Commission (“SEC”) against TGC and its founder, Kenneth D. Courtright, III (“Courtright”), wherein the SEC alleged TGC and Courtright violated federal securities laws and sought civil penalties and injunctive relief to halt their wrongful activity.
We previously wrote about PLB Investments LLC et al v. Heartland Bank and Trust Co. et al., a related case initiated by various defrauded investors of TGC against two bank defendants concerning TGC’s website services Ponzi scheme.…
Continue Reading New Complaint – Damian, as Receiver of Today’s Growth Consultant, Inc. v. SmithAmundsen, LLC
New Complaint – Oregon JV LLC v. Advanced Investment et al.
Oregon JV LLC v. Advanced Investment et al. was filed in the United States District Court for the District of Oregon on March 2, 2022. Plaintiff asserts claims sounding in fraud and requests compensatory and equitable relief against a construction lender and other individuals and entities that funded various loans to a homebuilder with a history of fraud and embezzlement.
Plaintiff is a company that managed a construction loan pool for non-party Joseph Russi. Defendant Advanced Investment Corp (“AIC”) is an Oregon-based corporation that previously managed the loan pool at issue. The remaining Defendants consist of trustees of various trusts, Oregon-based financial institutions, and several Oregon residents, all of which were investors in the subject loan pool (the “Defendant Lenders”).…
Continue Reading New Complaint – Oregon JV LLC v. Advanced Investment et al.
New Complaint – Tu Le et al. v. Prestige Community Credit Union
Tu Le et al. v. Prestige Community Credit Union, filed in the United States District Court for the Central District of California on February 18, 2022, is the second putative class action filed in connection with a church-based investment scheme propped up by Ponzi-type payments, this time targeting the bank that housed the schemers’ accounts.
Plaintiffs Tu Le, Geneva Nguyen, and Mai T. Ly are individuals who invested in a scheme run by entities related to a now-defunct church and its pastor, convicted felon Kent R.E. Whitney (the “Whitney Schemers”). The scheme targeted individuals by misrepresenting that their funds would be used to open investment accounts earning over 10% interest, but very little of investor funds actually went into trading accounts. Defendant Prestige Community Credit Union (“Prestige”) is the credit union purportedly used by the Whitney Schemers. Plaintiffs seek to represent a class of all individuals who invested and lost money with any of the Whitney Schemers, as well as a sub-class of all such class members who were residents of California and over 65 years old at the time of investment.…
Continue Reading New Complaint – Tu Le et al. v. Prestige Community Credit Union
New Complaint – yLoft LLC v. Bechtler, Parker, Watts, P.S.C.
yLoft, LLC v. Bechtler, Parker & Watts, P.S.C. was filed in the Circuit Court for Jefferson County, Kentucky on January 18, 2022, asserting claims for negligent misrepresentation, fraudulent misrepresentation, violation of state securities laws, and unjust enrichment against an accounting firm alleged to have facilitated the sale of unregistered securities.
Plaintiffs are individuals and institutional investors that invested in promissory notes sold by non-parties ACS Payment Solutions, LTD Co. d/b/a ACS Payment Solutions, LLC and ACS Payment Solutions II Incorporated (collectively, “ACS”). Defendant Bechtler, Parker & Watts, P.S.C. (“BPW”) is an accounting firm owned by Defendant Christopher J. Bechtler (“Bechtler”) that performed accounting services for ACS and Plaintiffs. Defendants are alleged to have engaged in a scheme with ACS to solicit and defraud outside investors, including Plaintiffs.…
Continue Reading New Complaint – yLoft LLC v. Bechtler, Parker, Watts, P.S.C.
Illinois Federal Court Carves Up Plaintiffs’ Ponzi Scheme Claims For Lack of Actual Knowledge or Bad Faith
Backed by unrealistically ambitious owners, well-intentioned business ideas that fail to meet expectations or become unsustainable regrettably often become full-fledged Ponzi schemes. Today’s Growth Consultant, Inc. (“TGC”) represents an entity that faced the same fate.
TGC advertised to potential investors its expertise in building, acquiring, and monetizing online websites. Investors paid an upfront fee to TGC to purchase, host, maintain, and market the investors’ websites in exchange for TGC’s guarantee that investors would receive a minimum rate of return in perpetuity on the revenues TGC generated from those websites. TGC raised at least $75 million during a nearly three year period, but its business model proved unsuccessful—it failed to timely purchase and build the promised websites or generate the promised revenue to cover the guaranteed returns to investors. Instead, TGC turned into a Ponzi scheme to sustain its failing business by paying early investors with money it raised from later investors.
TGC maintained its business bank accounts at Defendants Heartland Bank and Trust Company (“Heartland”) and PNC Bank, N.A. (“PNC”) (collectively, “Defendants”). TGC banked with Heartland until October 2018, and with PNC thereafter until December 2019. Defendants provided TGC with typical banking services, including deposit accounts, commercial loans and revolving lines of credit, ACH capabilities, and transfers into, out of, and among TGC’s accounts.
In a recent decision in PLB Investments LLC et al. v. Heartland Bank and Trust Co. et al., the Northern District of Illinois decided that various defrauded investors of TGC (“Plaintiffs”) did not set forth sufficient allegations to show actual knowledge of a Ponzi scheme or bad faith in support of various Illinois state law claims against PNC. No. 20 C 1023, 2021 WL 5937152 (N.D. Ill. Dec. 15, 2021). While different jurisdictions set varying thresholds for adequately alleging actual knowledge or bad faith, PLB Investments emphasizes the importance of analyzing these elements early on to determine whether a plaintiff has alleged sufficient facts on the pleadings.…
Continue Reading Illinois Federal Court Carves Up Plaintiffs’ Ponzi Scheme Claims For Lack of Actual Knowledge or Bad Faith