Banks Accused of Facilitating $20M NFT Scam in New Lawsuit
On Monday, September 16, 2024, Michael B. Zidell, the Michael B. Zidell 1997 Exempt Lifetime Trust, and the Michael B. Zidell 2016 Exempt Lifetime Trust filed a complaint in the US District Court for the Northern District of Texas against East West Bank, Cathay Bank, and Citibank, N.A. The lawsuit seeks damages related to an alleged investment scam that resulted in losses exceeding $20 million.
The complaint alleges that Zidell was lured into a fraudulent scheme involving non-fungible tokens (NFTs) through social media interactions with an individual named Carolyn Parker. The complaint describes Parker as having presented herself as a successful business owner who encouraged Zidell to invest in a platform called OpenrarityPro.com, which she claimed would yield substantial returns on investments in NFTs.
According to the complaint, this investment opportunity was ultimately a scam, with the plaintiffs being misled into wiring large sums of money to various bank accounts associated with the defendants. Over several months, Zidell reportedly made 43 wire transfers totaling approximately $20 million to accounts at East West Bank, Cathay Bank, and Citibank, which he believed were legitimate investments.
The complaint highlights that the banks involved failed to adhere to their regulatory obligations under the Bank Secrecy Act, specifically regarding Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. These regulations mandate that financial institutions conduct due diligence to identify and mitigate risks associated with fraudulent activities. The plaintiffs assert that the banks had a duty to monitor suspicious transactions but neglected these responsibilities, thereby facilitating the alleged scam.
The complaint details numerous wire transactions made to the banks, including significant amounts transferred to accounts purportedly linked to business entities like Luna Light and Guju, Inc. The complaint indicates that funds were rapidly withdrawn after being deposited, raising red flags that should have prompted further investigation by the banks.
In total, the plaintiffs’ wire transfers to East West Bank amounted to approximately $6.98 million, while transfers to Cathay Bank totaled around $9.77 million. Citibank received about $3.94 million in wire transfers from Zidell. The significant volume and rapid movement of these funds are cited as indicators of potential illicit activity that the banks should have recognized.
The lawsuit also references a prior government action, where the United States seized funds connected to the banks involved in this case. This seizure was linked to allegations of wire fraud, with the government claiming that the funds constituted proceeds traceable to unlawful activities. The plaintiffs express their belief that the banks’ lack of compliance with regulatory standards directly contributed to their financial losses.
Zidell’s experience escalated into a classic “rug pull” scenario, where the fraudulent platform disappeared once it had extracted substantial funds from investors. After realizing the potential fraud, Zidell reported the incident to law enforcement agencies, including the Dallas Police Department and the FBI.
The plaintiffs are seeking compensatory damages for their losses, as well as the recovery of legal fees and costs associated with the lawsuit. In addition, they demand a jury trial to adjudicate their claims against the defendants.
Please contact BlockTribune for access to a copy of this filing.
