Class Claims Bank Abetted Ponzi Scheme

      LOS ANGELES (CN) – East West Bancorp helped AOB Commerce sell fake promissory notes in a 3-year Ponzi scheme that took $45 million from hundreds of victims, according to a Superior Court class action. Lead plaintiffs Carmen Amezcua and Maria Barragan claim AOB controller Terchi Liao couldn’t have pulled off the scam without help from East West branch manager Lai Chu aka Queenie Chu.

     Chu allegedly directed East West’s dealings with AOB, loaning the company money, referring investors to the scam, and socializing and traveling with Liao and AOB.
     Amezcua and Barragan say they invested their lifes’ savings in promissory notes that AOB “guaranteed” would earn monthly interest 5.5 percent.
     AOB claimed it would loan the investors’ money to companies in Asia. But the Securities and Exchange Commission sued AOB in July 2007, claiming that while AOB made a few small loans to Chinese companies, it kept most of the money, and used some to pay off investors and others who found new victims, the plaintiffs say.
     East West was “the primary bank” where AOB cleared its fraudulent transactions, according to the complaint. Plaintiffs say East West participated by “systematically clearing checks presented for payment on AOB accounts that had insufficient funds.” Because of that arrangement, the plaintiffs say, the bank must have known that AOB was using investor money to pay monthly interest on other investors’ promissory notes. The bank also allegedly sent AOB money to Chinese branch officers’ personal accounts and to Liao’s other offshore accounts.
     The bank let Liao operate more than 20 accounts at East West, despite warnings from the Treasury Department, according to the complaint.
     Seven days after the court ordered East West to hand over AOB’s money, Chu gave Liao cashier’s checks and cash from his accounts totaling $745,000, the plaintiffs say.
     Barragan says she lost $100,000; Amezcua says she lost $50,000.
     Plaintiffs are represented by Julio Ramos and Steven Nunez.

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