NYTimes.com
Bank of America effectively set up a branch in a Long Island office that helped Nicholas Cosmo carry out a $380 million Ponzi scheme, according to a class-action lawsuit filed in federal court, The New York Times’s Leslie Wayne reported.
The lawsuit, filed in Federal District Court in Brooklyn late Thursday, contends that Bank of America “established, equipped and staffed” a branch office in the headquarters of Mr. Cosmo’s firm, Agape Merchant Advance. As a result, the lawsuit contends that the bank knowingly “assisted, facilitated and furthered” Mr. Cosmo’s fraudulent scheme.
“Bank of America was at the epicenter of this scheme,” said the lawsuit, which seeks $400 million in damages from the bank and other defendants. “Without Bank of America’s participation, the scheme would not have succeeded and grown to such an enormous size.”
Mr. Cosmo surrendered to authorities at a Long Island train station in January in connection with a suspected Ponzi scheme involving what Mr. Cosmo called “private bridge loans” that promised investors returns of 48 percent to 80 percent a year. Many of his 1,500 investors were blue-collar workers and civil servants.
Bank of America declined to comment, saying that it had not yet seen the suit.
According to the suit, representatives of Bank of America worked directly out of Mr. Cosmo’s West Hempstead office, which was about 30 miles from the branch where Agape and Mr. Cosmo maintained their bank accounts. In addition, Bank of America provided on-site representatives at Agape with bank equipment and computer systems that allowed direct access to the bank’s accounts and systems, the suit said.
“Essentially, Bank of America established a fully functional bank branch manned by its own representatives within Agape’s offices, which is contrary to normal banking practices,” the lawsuit said. As a result, the bank’s representatives had “actual knowledge” that Mr. Cosmo was “diverting money to his own account” and “engaging in virtually no legitimate business whatsoever.”
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