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Monday, June 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

Bank Accused of Assisting $191M Ponzi Scheme

SAN DIEGO (CN) - SunTrust Banks helped LandAmerica 1031 Exchange Services defraud hundreds of investors of $191 million in a Ponzi scheme, a class action claims in Federal Court.

LandAmerica 1031 Exchange Services (LES) filed for bankruptcy so plaintiffs say they cannot get relief from it. They did sue LES director Stephen Connor, of Chicago, and G. William Evans, residence unknown. They claim that due to the collapse of the auction rate securities market, "LES ran a Ponzi scheme after Feb. 13, 2008, until it filed for bankruptcy on Nov. 26, 2008."

The class claims LES knew it was bankrupt and should have declared knowing when the auction rate securities market crashed, but "instead of declaring bankruptcy on Feb. 13, 2008 or soon thereafter and distributing the net proceeds of the ARS remaining in the trust to the beneficiaries in the trust at the time of insolvency, LES continued to operate with the assistance and cooperation of SunTrust. LES continued to solicit new clients, including the plaintiffs, to deposit the exchange funds at SunTrust, knowing that new client exchange funds would be used to fund old 1031 exchanges ... . Qualified intermediaries who pay older exchanges with after-acquired funds when the trust is in a deficit operate a Ponzi scheme."

The four named plaintiffs say they lost a total of $1.4 million.

The class is represented by Robert Brace with Hollister & Brace of Santa Barbara.

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