Interactive Brokers Turned a Blind Eye to Fraud, Allowing $23M Ponzi Scheme to Continue, Class Action Alleges

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Interactive Brokers Class Action Lawsuit Overview:

• Who: Interactive Brokers has been served a class action lawsuit years after its former broker was sentenced to prison in 2017 for running a $23 million Ponzi scheme
• Why: The class action alleges that Interactive Brokers knowingly allowed fraud on its platform and knew Haena Park, former broker at Interactive Brokers, was conducting fraud 
• Where: The class action lawsuit was filed in the US District Court for the Northern District of California

Online trading company Interactive Brokers (IB) knowingly allowed fraud on its platform that helped prop up a $23 million Ponzi scheme run by former broker Haena Park, a new class action lawsuit alleges. 

Park was sentenced to prison in 2017 for ripping off family and friends, immigrants working multiple jobs for decades, and a man who is paraplegic and who lost $4 million after telling Park he would soon retire because his health was deteriorating, CBS reports.

Park had promised clients returns of up to 50 percent, but was resorting to fraud to cover her losses, squandering $23 million on bad investments. 

On Monday, Interactive Brokers was sued for its role in the millions lost, with plaintiffs saying the firm knew Park’s account was being used to conduct fraud but did nothing about it. 

They said suspicious activity on her account was flagged more than a dozen times, ThinkAdvisor reports.

“Rather than scrutinize the activity, freeze the account, and report Park to the authorities, IB disregarded its own compliance department’s red flags and written internal compliance policies to further aid Park, a lucrative IB customer, to continue the scheme through its brokerage services,” the Interactive Brokers lawsuit says.

The class action says IB’s participation in the Ponzi scheme came to light when the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority and Commodity Futures Trading Commission (FINRA) simultaneously announced a joint action against it for its role in the fraud. 

Interactive Brokers agreed to pay the SEC $38 million in 2020 over its failure to file suspicious activity reports on multiple occasions. It was also hit with a $15 million fine from FINRA for failures in its anti-money laundering program. 

Interactive Brokers Group LLC is one of the world’s largest brokers, ThinkAdvisor reports. It has over $9 billion in equity capital and more than a million client accounts.

In other securities law news, a group of investors say media mogul billionaire Miles Guo preyed upon hard-working immigrants from China, scamming them into fake investments. 

The class action lawsuit, filed in June, alleges that Guo, along with his representatives, sold unregistered securities to unsophisticated investors in the Chinese diaspora to their detriment.

What do you think of IB’s failure to act on the suspicious account activity? Let us know in the comments! 

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