Last updated on May 21, 2020
In February 2019, seven US citizen, on behalf of themselves and all others similarly situated, brought a putative class action against Bank of America, Capital One, Citibank, J.P. Morgan Chase, and Wells Fargo Bank, alleging claims of negligence, aiding and abetting, and fraudulent concealment pursuant to New York State common law and Article 9 of the New York Civil Practice Law and Rules (NYCPLR). In short, the plaintiffs claim that these banks have facilitated the fraudulent binary options schemes around GreyMountain Management Ltd (GMM) of the three brothers David Cartu, Jonathan Cartu, and Joshua Cartu. Only a few weeks ago, the Canadian regulator Ontario Securities Commission (OSC) filed a lawsuit against the Cartu brothers. In Ireland, there is also a million-dollar lawsuit against David Cartu, the former GMM directors and GMM itself.
Complaint against GMM Payment Processors and their banks
The Complaint alleges that the named plaintiffs transferred money from their credit card and bank deposit accounts to different binary options scams via GMM, Worldwide Tech, Nelstone Services Limited, and related payment processors. Between 2015 and 2017 GMM has been a third-party acquirer and/or routing partner to the German Wirecard.
As often reported by FinTelegram, the Cartu brothers around GMM have operated a global network of fraudulent binary options schemes themselves or through third parties. GMM has acted as a payment processor in close connection with other FinTechs and banks. One of GMM’s directors was Ryan Coates, the son of the then Wirecard UK & Ireland director Michelle Molloy. GMM was put into liquidation in summer 2017. This has not yet been finalized.
Banks seek to dismiss class action
While Wells Fargo, Citibank, Bank of America (BofA), and Capital One filed separate dismissal bids last week, JPMorgan Chase, requested that the claims against it be forced into arbitration.
Citibank argued that the plaintiffs had no standing to bring claims against it because they do not have bank accounts with Citibank, while Wells Fargo, BofA, and Capital One argued that the court lacks jurisdiction over them because the dispute has no connection to New York. Furthermore, the banks claim that none of the named plaintiffs resides in New York and that the transactions took place overseas, meaning that the suit cannot be brought in New York.
Poor investment decisions and no warning duty
The banks argue that they are not liable for the plaintiffs’ “poor investment decisions.” The plaintiffs, however, argue that the banks knew or should have known about the alleged fraud carried out by the binary options platforms and intermediaries, and should have prevented the credit card and debit card payments and wire transfers made by consumers to GMM and other related intermediaries.
The banks also purport that it is not their duty to warn customers about risky investments with third parties and that it is not required to cover investment losses on the consumers’ behalf when the consumers authorized the transactions.
Wells Fargo did not have a duty to monitor the Plaintiffs’ investment decisions and warn them about high-risk, overseas investments […] Wells Fargo was not obligated to pay for the Plaintiffs’ poor investment decisions.Wells Fargo said.
The plaintiffs are represented by Jonathan E. Neuman of the Law Offices of Jonathan E. Neuman.
The case is Anderjaska et al. v. Bank of America N.A. et al., case number 1:19-cv-03057, in the U.S. District Court for the Southern District of New York.