Interactive Brokers accused of evading document production in Ponzi scam case
As the lawsuit brought by Benjamin Chang, a victim of a Ponzi scheme operated by Haena Park, against Interactive Brokers continues at the California Northern District Court, the conflict now appears to focus on document production.
This becomes clear from a letter filed by Chang with the Court earlier this week. In the letter, seen by FX News Group, the plaintiff describes his attempts to get access to certain documents necessary to build his case. Interactive Brokers, Chang says, is trying to avoid producing the requested evidence.
In this case, Plaintiff Benjamin Chang alleges that Interactive Brokers aided and abetter the Ponzi scheme operated by Haena Park. Mr Chang was introduced to Park through family members and was one of the people from whom Park solicited funds. He provided Park approximately $167,000 to invest and Park represented to Plaintiff it would be invested in Forex.
Park sent Plaintiff statements indicating his investment was growing when in fact his funds had been lost, redirected to other investors as Ponzi-style dividend payments, or used for Park’s personal benefit.
Chang claims to represent himself and others similarly situated as he brings this action against Interactive Brokers LLC (IBKR) for actual damages suffered by him and the class, and for other recovery specified herein for harm caused by IBKR aiding and abetting fraud and aiding and abetting breach of fiduciary duties.
Plaintiff and the class allege they are victims of a Ponzi scheme perpetrated with IBKR’s knowing assistance. The scheme was devised by Haena Park, an IBKR 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.
IBKR 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 report Park to the authorities, IBKR supervisors disregarded their own compliance department’s warnings to further aid Park, a lucrative IBKR customer, to continue the scheme through its brokerage services.
Through her IBKR account, Park lost over $19 million of her investors’ contributions before the scheme was discovered by regulators and Park was arrested.
On October 6, 2021, Plaintiff served three Rule 34 document requests on IBKR. Plaintiff’s requests seek: (1) documents IBKR provided to any regulatory authority in connection with any investigation of Haena Park; (2) communications between IBKR and any regulatory authority in connection with any investigation of Haena Park; and (3) transcripts of any depositions or interviews of IBKR personnel that were conducted in connection with any investigation of the Haena Park Ponzi scheme.
Plaintiff’s Rule 34 requests were served October 6, 2021. Given the amount of time that has passed with little or no effort by IBKR to genuinely engage in discovery, Plaintiff has no confidence that IBKR will timely produce the documents responsive to Plaintiff’s Rule 34 requests.
On March 16, Interactive Brokers responded to the requests, again refusing to give a timeline, and adding new layers of delay as to what it will produce and when, stating that IBKR has only recently restored productions made to the CFTC and “as such, we have not had an opportunity to assess this information to provide you with a proposal of what would be reasonably responsive to your requests, or to determine a reasonable timeline to make a production once we agreed to the terms of the scope of our search and production with you. We will send you a realistic proposed discovery plan once that review is complete….”
Interactive Brokers further stated that involving the Court at this time is premature.
The plaintiff says that Interactive Brokers’s evasion appears aimed at achieving a de facto stay of discovery while its renewed motion to dismiss is pending—precisely the relief that IBKR failed to achieve through appropriate procedures. With other case deadlines set, Plaintiff faces prejudice from the delay.
Since the broker has not explained the timing or substance of any forthcoming document production, Plaintiff is not able to propose a compromise. To the extent Interactive Brokers asserts that it cannot promptly determine which documents in its CFTC production relate to Haena Park, Plaintiff proposes that he be allowed direct access to the CFTC production to work jointly with IBKR on a search and production plan.