About a month after the Court sided with Interactive Brokers in a lawsuit alleging the electronic trading major aided the Ponzi scam orchestrated by Haena Park, the plaintiff has filed an amended complaint.

The document, submitted at the the California Northern District Court and seen by FX News Group, provides more detailed allegations about Interactive Brokers’ alleged knowledge of the fraudulent activities of Haena Park. This is important as the Judge had nixed the previous complaint by noting that it did not sufficiently plead IBKR’s knowledge of Park’s scheme.

Plaintiff Benjamin 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.

Now, 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.

In nearly every month it was in operation, Park’s IBKR account lost money. From 2012 to 2014, it lost $2.5 million, $2.2 million, and $2.3 million, respectively. In 2015, the account lost a staggering $7.8 million. As of 2016, the account had lost $17.5 million and another $1.5 million in cash was withdrawn. Rather than disclosing these losses, Park produced sham statements to her investors showing impressive gains from her Phaetra funds.

At times, Park accepted new investment funds from one investor and used some or all of those funds to make Ponzi-like dividend payments to other investors as an enticement to keep their money in her funds or make additional investments.

Park failed to disclose these heavy losses to her investors. She further failed to disclose to them that she was misappropriating investor funds to pay other investors phony dividends or for her own personal expenses.

Even though Park’s IBKR account suffered excessive losses, she continued making enormous deposits into her IBKR account. For example, in 2012, she made several deposits into her account totaling $2.7 million, despite the fact she had shown no addition sources of income.

In the next three years, her aggregate deposits totaled $2.6 million, $3.4 million, and $7.9 million, respectively. Many of the deposits were so sizeable, often involving hundreds of thousands of dollars, that they were manually reviewed and processed by IBKR personnel. Taken together, these deposits far exceeded Park’s stated net worth as originally disclosed in her account opening documents and suggested to IBKR she was trading – and losing – investor money.

As required under IBKR internal policies and regulatory requirements, IBKR collected and analyzed records and information regarding Park and her transactions to develop a customer risk profile. Beginning in 2013, and possibly earlier, Park’s excessive losses and deposits elevated the rating of her customer risk profile and triggered increased focus on her account within IBKR’s compliance department. The compliance department’s sole and explicit objective in elevating the rating of her risk profile was to discern the purpose of the transactions in her account.

Automated systems that perform IBKR compliance work as well as the compliance department employees who review the reports from these automated systems were required to and did examine Park’s background, including her total net worth, her accumulated assets, the source of her funds and wealth, her income, her occupation and professional background, and her level of investing sophistication and trading history.

Additionally, these automated compliance systems and compliance department employees analyzed the patterns in her trades using the IBKR platform, including the products and services she used, the timing and size of her deposits, the timing and size of her investments, where and how she initiated her trades, and nature of the financial instruments in which her portfolio invested. They also performed ongoing monitoring of the activity in her account. The review of this information and the ongoing monitoring of her account was explicitly intended to detect suspicious transactions, including transactions indicating she was using third-party investor funds.

As Park’s customer risk rating increased, so too did the focus of IBKR’s compliance department on her account. Between 2013 and 2015, Park appeared more than 12 times in an internal IBKR report that identified account holders whose losses exceeded a certain percentage of their stated liquid net worth. This report was run monthly and searched for data over the prior six months. Each time Park’s account appeared on this report, IBKR compliance analysts manually reviewed Park’s historical trading activity. From 2014 to 2016, Park’s account appeared at least five times on surveillance reports generated by IBKR’s compliance department identifying customers who had more than 6 withdrawals or deposits in a given month.

IBKR compliance analysts reviewed these internal reports with the sole and explicit goal of understanding the purpose of Park’s account, including determining whether Park was using the account to pool third-party investor funds.

According to the complaint, IBKR compliance analysts knew:

• Park was experienced in the financial industry and likely to have connections to other financial professionals and third-party investors;
• Park was an individual, non-institutional investor, claiming she was an “at-home” trader, who would neither be expected nor permitted to pool and invest third-party investor funds through her IBKR account;
• Park used multiple bank accounts, including two personal bank accounts and an account in the name of “Argenta Group LLC” (an entity unregistered with the CFTC), to deposit funds into and withdraw funds from her IBKR account;
• Park consistently deposited and invested more than would be expected, and eventually more than her net worth through her IBKR account;
• The losses in her portfolio consistently exceeded what a customer of her background and means would normally be able to sustain by a substantial margin;
• Despite Park’s personal net worth being exhausted and the account’s staggering ongoing losses, Park continued to make abnormally frequent cash deposits into and withdrawals from her account; and
• Despite her losses, Park continued a consistent pattern of highly leveraged and risky trades concentrated in futures and forex instruments that exposed her account to excessive volatility and risk.

Much of the conduct the IBKR compliance analysts observed, such as the use of multiple deceptively named banks accounts and excessive deposits and withdraws despite heavy losses, constituted telltale signs of investment fraud that IBKR compliance analysts were trained to spot.

The plaintiff notes that IBKR may not have had specific knowledge of certain details of Park’s scheme, such as the exact number of her investors, the identities of her investors, or the specific misrepresentations she made to her investors regarding their investments. IBKR did, however, know that Park was using pooled third-party investor funds in her IBKR account, which necessarily involved fraudulent activity given that pooling and investing third-party funds in such a manner was impermissible and illegal under the terms of her account.

Having reviewed the totality of the facts above, among other information, IBKR compliance analysts concluded that Park’s account was necessarily using third-party investor funds, an activity that was not only abnormal but impermissible and illegal given her account type and its stated purpose. The complaint further alleges that IBKR knew Park had deceptively held herself out for the purpose of opening her account as an individual, at-home trader so as to minimize the scrutiny of her account.

Moreover, IBKR compliance analysts allegedly knew the account was losing these third-party funds at a staggering rate. By 2015, in an effort to escalate the matter, compliance analysts made notes to the file and informed supervisors regarding the suspicious activities they observed.

Park could not have conducted this scheme without the involvement of IBKR, Chang says. IBKR compliance officers to whom this activity was ultimately reported overrode the IBKR Customer Account Supervision System so as to allow her to continue trading, he argues.

The complaint alleges that IBKR officers encouraged analysts to close reviews of Park’s account when it appeared on surveillance reports and to use boilerplate language to document their decisions, including stating they found there were “no apparent third party deposits” and that “activity does not appear unusual,” so that Park’s trading activity would not trigger further investigation or monitoring.

The plaintiff seeks, inter alia, actual and compensatory damages according to proof, as well as punitive damages.