Investors Seek Class Certification In Bank-Aided Ponzi Scheme Lawsuit

Investors Seek Class Certification In Bank-Aided Ponzi Scheme Lawsuit

A group of investors has asked a California federal court to certify a class-action lawsuit against a bank that is alleged to have helped and encouraged an alleged Ponzi scheme run by a now-deceased real estate investment manager. The lawsuit alleges that Oregon-based Umpqua Bank knew that Professional Financial Investors Inc. and Professional Investors Security Fund Inc. (jointly, “PFI”) were using new investor money to pay existing investors. 

Lawsuit Claims That Umpqua’s Actions Victimized Investors Out Of $400 Million

The investors are alleged to have lost an average of more than $200,000 each “due to Umpqua’s actions.” The lawsuit claims that more than 1,200 investors were victimized out of more than $400 million. Although the victims may recover approximately $100 million from a bankruptcy proceeding, they still would be left with about $300 million in damages.

The investors’ complaint is based on an alleged Ponzi scheme perpetrated by Kenneth J. Casey, who formed PFI in the San Francisco Bay Area and died in 2020. 

PFI Employees Falsified Financial Data

A lawsuit filed by the U.S. Securities and Exchange Commission alleges that Casey lured investors by making fraudulent and deceptive assertions that investors’ money would be invested in multi-unit residential and commercial real estate. According to the SEC, Casey directed PFI employees to falsify financial data to make the investments appear secure and prosperous.

The SEC alleges that a large amount of investors’ money was used to pay purported investment returns to earlier investors, a hallmark of a Ponzi scheme. Casey also allegedly used investors’ money to refurbish one of his residences and to pay federal and state taxes. According to the FBI, Casey plundered investor monies from at least 2011 until his death in May 2020.

Court filings allege that Casey ran his scheme through Umpqua’s Novato, California, branch, which allegedly “agreed to look the other way” when other financial institutions refused PFI as a banking customer due to Casey’s history of financial crime.

PFI Was Soliciting Funds To Pay Previous Investment Returns

In 1997, Casey pled guilty to 21 charges of bank fraud, five counts of tax evasion, five counts of filing false income tax returns, and one count of conspiracy to defraud the United States. According to the investors, Caset was sentenced to 18 months in prison and was stripped of his public accounting license.

PFI principally sold promissory notes and LLC memberships to Bay Area residents. Investors were not told that PFI was soliciting funds from new investors to pay investment returns to earlier investors and to personally benefit Casey.

While certain real estate investments were legitimate, they did not generate sufficient rental profits to pay investors as promised and “were so burdened as to render investors’ collateral worthless or almost worthless,” according to the investors.

The investors said Casey knew the CEO of a tiny bank in Novato, California, who agreed to offer banking services to PFI. According to court filings, Umpqua purchased that bank in 2012. The investors allege that the bank branch assisted Casey in concealing his involvement by removing his name from bank records, allowing PFI to obtain real estate loans from other banks.

The investors further allege that a private banker who had worked for PFI for more than a decade often moved vast quantities of money into Casey’s account at his request. Several of the transfers were made from an account that the banker allegedly was aware included investor funds, “as she admitted at her deposition.” 

According to court filings, Casey defrauded investors out of at least $26 million between 2015 and 2020.

Think You Have a Case? Speak with a Ponzi Scheme Lawyer

Were you a victim of a Ponzi scheme? If you or someone you know has lost money as a result of a scheme, speak to an experienced investment fraud attorney today. Dimond Kaplan & Rothstein, P.A. has vast experience with cases related to Ponzi schemes. The firm has recovered millions of dollars for victims and we will aggressively pursue claims to recover your losses.  

Contact a Dimond Kaplan & Rothstein Attorney Today  

To schedule an appointment for a FREE case evaluation, contact a Ponzi Scheme attorney at Dimond Kaplan & Rothstein, P.A. today. 

Contact an investment fraud attorney at Dimond Kaplan & Rothstein, P.A. to schedule a FREE case evaluation. Our offices are located in  MiamiLos AngelesWest Palm BeachNew YorkNaples, and we represent clients nationwide. Translation services are available.