About a year after Interactive Brokers got a $38 million fine for widespread AML failures, a client has launched a lawsuit against the broker for allegedly aiding and abetting the fraudulent scheme at the basis of the misconduct that led to the penalty.
Benjamin Chang has filed a complaint at the California Northern District Court, suing Interactive Brokers LLC for actual damages suffered by him and the (potential) class, and for other recovery for harm caused by IB aiding and abetting fraud and aiding and abetting breach of fiduciary duties.
The plaintiff alleges that he and the class are victims of a Ponzi scheme perpetrated with the Interactive Brokers’knowing assistance. The scheme was devised by Haena Park, an IB 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.
IB 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 scrutinize the activity, freeze the account, and report Park to the authorities, IB disregarded its own compliance department’s red flags and written internal compliance policies to further aid Park, a lucrative IB customer, to continue the scheme through its brokerage services.
Through her IB account, Park lost over $14 million of her investors’ contributions before the scheme was discovered by regulators and Park was arrested. She was sentenced to 3 years in prison in 2018. In 2020, IB’s participation in the scheme came to light when the SEC, FINRA, and CFTC all simultaneously announced a joint action against IB for its role in the fraud and for other regulatory compliance violations.
Chang brings this action to recover from IB the damages sustained as a result of the firm’s wrongdoing and substantial assistance in the Park scheme.