Interactive Brokers reiterates opposition to claims it aided Ponzi scheme
Electronic trading major Interactive Brokers continues to fight allegations that it aided a Ponzi scheme. On November 16, 2021, the broker replied to traders’ opposition to its motion to dismiss. As one might expect, Interactive Brokers reiterates its stance that it did not assist the scam.
Let’s recall that the case was brought by Benjamin Chang who sues Interactive Brokers LLC for actual damages suffered by him and the (potential) class, and for other recovery for harm caused by IB allegedly 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.
Interactive Brokers disagrees with the allegations. According to the broker, the plaintiffs’ complaint seeks to transform certain findings of the U.S. Commodities Futures Trading Commission (CFTC) regarding omissions in IBKR’s anti-money laundering compliance in 2020 into a claim that IBKR consciously and knowingly aided and abetted Haena Park in her fraud scheme.
Interactive Brokers says that the Complaint is based almost entirely on cherry-picked aspects of the CFTC’s Order, but the plaintiffs seek to ignore the CFTC’s findings that Park’s conduct was “unbeknownst” to IBKR.
According to the broker, no other allegation of fact suggests it knew of the specific object of Park’s conduct. Nor do the Complaint’s allegations that IBKR failed to prevent Park’s misdeeds amount to substantial assistance of her scheme.
Finally, the plaintiffs provide no credible response to explain why their claims are not time-barred.
The broker notes that the plaintiffs were plainly aware of their injuries when Park’s scheme was exposed in 2016 and they knew by then that Park utilized her IBKR account to make the trades central to it. But the Complaint contains not one single allegation of fact that Chang or anyone else made any effort whatsoever to investigate their claims until they were already time-barred.
Interactive Brokers LLC requests that the Court dismiss each count of the Complaint with prejudice.