Less than two months after Benjamin Chang, a victim of a Ponzi scheme operated by Haena Park, submitted an amended complaint against Interactive Brokers, the electronic trading major has sought to rebuff the allegations in the amended complaint.
On February 7, 2022, Interactive Brokers filed a motion to dismiss the amended complaint in the California Northern District Court. The document, seen by FX News Group, states that the plaintiff’s amended complaint fails to allege the broker aided and abetted the Ponzi scheme.
Plaintiff Benjamin Chang was introduced to Park through family members and was one of the people from whom Park solicited funds. He provided Park approximately $167,000 to invest and Park represented to Plaintiff it would be invested in Forex. Park sent Plaintiff statements indicating his investment was growing when in fact his funds had been lost, redirected to other investors as Ponzi-style dividend payments, or used for Park’s personal benefit.
Chang claims to represent himself and others similarly situated as he brings this action against Interactive Brokers LLC (IBKR) for actual damages suffered by him and the class, and for other recovery specified herein for harm caused by IBKR aiding and abetting fraud and aiding and abetting breach of fiduciary duties.
Plaintiff and the class allege they are victims of a Ponzi scheme perpetrated with IBKR’s knowing assistance. The scheme was devised by Haena Park, an IBKR customer who solicited funds from Plaintiff and the members of the class through fraud and deceit and then misused those funds for her own gains and to make phony dividend payments to other investors caught up in the scheme.
IBKR allegedly recognized Park’s account was used to conduct a fraud, identifying her suspicious activity in reports reviewed by compliance analysts more than a dozen times during the life of the scheme. Rather than report Park to the authorities, IBKR supervisors disregarded their own compliance department’s warnings to further aid Park, a lucrative IBKR customer, to continue the scheme through its brokerage services.
Through her IBKR account, Park lost over $19 million of her investors’ contributions before the scheme was discovered by regulators and Park was arrested.
In its response to the amended complaint, Interactive Brokers says that the plaintiff once again seeks to hold IBKR liable for aiding and abetting a Ponzi scheme operated by one of its customers, Haena Park, over five years ago based on allegations that, because IBKR had deficient compliance processes, IBKR must have actually known that Park was orchestrating a Ponzi scheme.
The broker stresses that this was the exact theory that plaintiff unsuccessfully asserted in his initial complaint and that the Court held “required the Court to jump to unsupported conclusions.” According to Interactive Brokers, the amended complaint adds nothing new to cure this deficiency and, indeed, concedes “IBKR may not have had specific knowledge of certain details of Park’s scheme,” including the existence and identity of Park’s investors and Park’s communications with those investors.
IBKR argues that Chang seeks to convert a regulatory action by the Commodity Futures Trading Commission (CFTC) regarding compliance failures into a “conscious decision to participate in tortious activity.” But the CFTC’s own findings—upon which each of Plaintiff’s complaints have been premised—expressly concluded that Park’s conduct was “unbeknownst” to IBKR.
Further, Interactive Brokers says that the plaintiff’s claims remain time-barred. In dismissing the initial complaint, the Court rejected Plaintiff’s efforts to invoke the discovery rule or grant equitable tolling. According to the broker, the allegations in the amended complaint compound Plaintiff’s deficiencies on these issues because they confirm that Chang was personally aware of the criminal investigation into Park in 2016, was interviewed as part of it, and was curious enough to ask questions about it then.
All Chang needed to do was perform an Internet search of this very investigation to find public filings revealing IBKR’s role as Park’s broker-dealer. This, IBKR says, conclusively establishes Chang’s actual – or, at least, constructive – knowledge of his claims by 2016.
Finally, Interactive Brokers notes that nothing in the amended complaint alters the Court’s prior finding that Plaintiff’s Unfair Competition Law (UCL) claim is “tethered” to his aiding and abetting claims and it fails for the same reasons.