“Recognizing Hidden Assets, The Red Flags” explained that bankruptcy trustees, tax authorities, financial intelligence units, etc. search for concealed assets by looking for red flags of fraud or other illicit acts. Lawsuits brought by investors damaged by Ponzi schemes also may focus on red flags, as described at “Florida Court Unlikely To Find Wachovia, Mastercard Civilly Liable For Missing Ponzi Scheme.”
Among other things, the lawsuits filed by the damaged investors argue that a financial institution negligently or recklessly permitted Ponzi schemers to launder Ponzi proceeds through a particular financial account. These lawsuits typically seek money damages by arguing that a financial institution ignored money laundering red flags in violation of the Bank Secrecy Act. The lawsuits assert this even though such claims are routinely dismissed by the Court.
Madoff Trustee Irving Picard similarly discusses red flags at paragraphs 213, 249, 253, 305 of his December 5, 2010 Amended Complaint against HSBC. Unlike the above-mentioned lawsuits brought primarily under the Bank Secrecy Act, Trustee Picard’s Amended Complaint relies on both bankruptcy, securities laws and New York’s fraudulent conveyance law, to recover alleged Ponzi proceeds. Counts 20-24 of the Amended Complaint meanwhile, assert common law claims and the Amended Complaint also accuses HSBC of “burying their heads in the sand“. To document ways HSBC was allegedly related to Madoff’s Ponzi scheme, the Amended Complaint additionally relies on several link charts, including this one:
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