NEW YORK (Reuters) - TD Bank has agreed to pay $20 million to settle a class action lawsuit accusing it of aiding a Ponzi scheme that allegedly bilked over a thousand European investors of more than $223 million, a lawyer for the investors said on Friday.
The preliminary settlement, subject to court approval, resolves accusations that TD Bank, part of Canada’s Toronto-Dominion Bank (TD.TO), failed to properly monitor trust accounts that held investors’ money and ignored its duty to investigate suspicious activities under U.S. anti-money laundering rules.
“This is a terrific result for the class,” said David Buckner, a lawyer for the investors.
A TD Bank spokeswoman said it is pleased the matter is close to a resolution.
In court filings, lawyers for TD Bank said investors failed to show the bank had actual knowledge of misconduct. The bank provided routine banking services, which did not constitute substantial assistance to the alleged scheme, the lawyers said.
Filed in 2014, the lawsuit sought damages for investors in Belgium, the Netherlands and Spain who bought so-called life settlements marketed through Quality Investments, a Dutch company with offices at the World Trade Center Amsterdam.
Life settlements are life insurance policies sold to investors who receive proceeds from death benefits when the insured person dies.
Dutch authorities in 2011 arrested four people suspected of running a Ponzi scheme through Quality Investments involving the sale of U.S. life insurance policies.
The settlement is the second in less than two years involving allegations that TD Bank failed to report suspicious activity in accounts allegedly used for a Ponzi scheme.
In September 2013, it agreed to pay $52.5 million to settle U.S. civil regulatory charges that it failed to uncover and report suspicious activities by Florida lawyer Scott Rothstein, who was sentenced to a 50-year prison term for a $1.2 billion fraud.
The latest lawsuit, filed in a South Florida federal court, said investors were assured their money and the insurance policies they invested in would be held in attorney trust accounts at TD Bank. Instead of being safeguarded, new investor funds were diverted to pay premiums on policies held for earlier investors, the lawsuit said.
The lawsuit said TD Bank failed to report suspicious activity in the accounts, including wire transfers of tens of millions of dollars to Cyprus, Turkey and other known money-laundering destinations.
The case is Gevaerts et al v TD Bank et al, U.S. District Court, Southern District of Florida, No 14-cv-20744
Reporting by Dena Aubin; Editing by Kevin Drawbaugh and Paul Simao