PHOENIX (CN) - A federal judge in Arizona approved a class action accusing the law firms Greenberg Traurig and Quarles & Brady of adding "a facade of legitimacy" to a $900 million Ponzi scheme.
Lead plaintiff Robert Facciola claimed the firms helped Mortgages Ltd. and its financier, Radical Bunny, run a securities scam that collected nearly $1 billion from about 2,000 investors between 2005 and 2008. Both companies collapsed in 2008, and Mortgages Ltd. CEO Scott Coles committed suicide the same year.
"Although Radical Bunny represented that it sold mortgage-backed securities, the investments were in fact unsecured, the securities were not registered, and the Radical Bunny principals were not licensed to sell securities - all in violation of Arizona securities law," wrote U.S. District Judge Frederick Martone, in a summary of plaintiffs' claims.
Facciola claimed Mortgages Ltd. "adopted a Ponzi scheme in order to hide its insolvency and remain in business by finding new investors through RB to pay its existing debt."
And Facciola accused Greenberg Traurig, which represented Mortgages Ltd., and Quarles & Brady, which represented Radical Bunny, of creating "a façade of legitimacy, enabling the Ponzi scheme and the ongoing illegal securities sales to continue."
Greenberg Traurig denied the claims in an email message sent to Courthouse News.
"We empathize with the investors who lost money but their investments were in loans that, unfortunately, fell victim to the collapse of the real estate market," the firm wrote. "We are disappointed with the procedural decision but we continue to believe that when the facts are fully presented, they will show that our firm and its lawyers acted appropriately and that the claim against them is without merit," the firm wrote.
Judge Martone certified two classes: the first includes about 975 people who invested some $600 million in Mortgage Ltd., represented by Tiffany & Bosco. The second is composed of about 779 Radical Bunny investors, who handed the company approximately $197 million, and are represented by Bonnett, Fairbourn, Friedman & Balint.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.