Lawsuit of the week: Class action slams HSBC for failing to sound alarm over Ponzi schemer’s account shenanigans

Investors burned in a $30 million Ponzi scheme are suing HSBC Bank Canada in a class action, claiming the bank failed to investigate and warn ...

Investors burned in a $30 million Ponzi scheme are suing HSBC Bank Canada in a class action, claiming the bank failed to investigate and warn them about fraudster Virginia Tan’s use of HSBC accounts to further the scheme.

Jastram Properties Ltd. filed a notice of civil claim under the Class Proceedings Act in BC Supreme Court on September 29. The company claims it was introduced to Tan, a West Vancouver businesswoman, through a contract employee and friend of the company’s owners, Peter and Lale Doetsch, in May 2012. Tan’s scheme, which fell apart in early 2016, promised investors returns of 12% to 24% on promissory notes purportedly for bridge financing deals.

According to the lawsuit, Jastram invested more than $2.9 million in the scheme between May 2012 and March 2013, and some of the money was allegedly deposited and paid out through Tan’s HSBC accounts. The company invested another $3.45 million in the scheme between April 2013 and March 2015, with interest payments totalling $1,798,566 paid out before Tan’s fraud collapsed.

“By 2011, Tan was making cumulative deposits to the HSBC Tan accounts of approximately $1 million per month, and was making cumulative withdrawals from the HSBC Tan account of approximately $1 million per month,” the claim states. “Most of the deposits in the HSBC Tan accounts were large amount [sic] in round numbers, and most of the withdrawals were cheques written to individuals for smaller round number amounts. These kinds of transactions are hallmarks of a Ponzi scheme.”

Jastram claims HSBC “became concerned” about Tan’s account activity in early 2013 and by then the bank “knew, or concluded that it was reasonably likely, that Tan was using the HSBC Tan accounts for fraudulent purposes.” Tan stopped using the accounts in March 2013 and began routing funds through accounts at three other financial institutions before the fraud was exposed.

“At no time did HSBC take any steps to notify the proper authorities, or to warn other financial institutions, whose customers’ funds had been deposited into the HSBC Tan accounts ... about the circumstances relating to the cessation of activity in the HSBC Tan accounts,” the claim states.

Jastram Properties seeks unspecified damages for failure to investigate and warn of the fraud on behalf of all persons who invested with Tan and her companies and lost money when the scheme ceased.

The allegations have not been tested or proven in court, and HSBC had not responded to the claim by press time.  

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