TD Bank will pay $20 million to settle a class action lawsuit in which the bank is accused of aiding a Ponzi scheme that allegedly defrauded over 1,000 European investors of more than $223 million, according to Reuters.
The preliminary settlement, which is subject to court approval, resolves claims that TD Bank failed to properly monitor trust accounts that held investors' money and ignored its duty to investigate suspicious activities under U.S. anti-money laundering rules.
The lawsuit, filed in 2014, sought damages for European investors who in 2011 bought so-called life settlements, which are life insurance policies sold to investors who receive the proceeds from death benefits when the insured person dies. Dutch authorities arrested four people suspected of running a Ponzi scheme through the company that marketed the policies, Quality Investments.
In the lawsuit, filed in a South Florida federal court, Reuters said investors claimed they were assured their invested money and insurance policies would be held in trust accounts at TD Bank, but they were diverted to pay premiums on policies held for earlier investors. TD is accused of failing to report suspicious activity in the accounts, including transferring millions of dollars to money-laundering destinations.
The multi-million dollar fine is the second paid by TD Bank in the last three years. In September, 2013, federal regulators fined TD Bank $52.5 million for its alleged role with a $1.4 billion South Florida-based Ponzi scheme conducted by Scott Rothstein, a now-disbarred lawyer who is serving a 50-year prison sentence after pleading guilty to running a scam involving investments on non-existent legal settlements.
The Securities and Exchange Commission said TD defrauded investors by producing a series of misleading documents and allegedly made false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme. Earlier this year, a federal judge in Florida ordered TD Bank to pay $67 million to satisfy a judgment won by victims of Rothstein's scam.
TD Bank is the U.S. banking arm of TD Bank Group, based in Toronto, Canada.