The Securities and Exchange Commission charged Canadian-based Toronto-Dominion Bank (TD Bank), along with a former executive, with violating securities laws linked to a costly South Florida Ponzi scheme.
After being cited, TD Bank agreed to settle the U.S. Securities and Exchange Commission’s charges in an administrative proceeding and pay a total fine of $52.5 million. Of the total fine, $37.5 million was paid to the Financial Crimes Enforcement Network and Office of the Comptroller of the Currency, while $15 million was paid to the SEC.
Scott Rothstein, who is now serving a prison sentence of 50 years, is charged with conducting the scheme, the SEC said.
TD Bank and its former regional vice president Frank Spinosa allegedly defrauded investors by producing a series of misleading documents, the securities commission said. The SEC also says the bank made false statements about accounts Rothstein held at the bank as part of his broader scheme.
The former regional VP incorrectly represented to investors that TD Bank had restricted the funds in these accounts, the SEC further claimed in its report. However, Rothstein could actually transfer investor money in any way he wanted. Spinosa also verbally guaranteed investors that specific accounts had millions of dollars in them, when in reality, each account actually held zero to $100.
"Financial institutions are key gatekeepers in the transactions and investments they facilitate and will be held to a high standard of accountability when their officers enable fraud," said Andrew Ceresney, co-director of the SEC's division of enforcement.
According to FINCEN, the bank conducted a review of the Rothstein transactions in 2011, upon which they identified an estimated $900 million in aggregate suspicious transactions between April 2008 and October 2009.
“In the face of repeated alerts on Mr. Rothstein’s accounts by the bank’s anti-money laundering surveillance software over an 18-month period, the bank did not do enough to prevent the pain and financial suffering of innocent investors,” FinCEN Director Jennifer Shasky Calvery said in a statement.
Eric Bustillo, director of the SEC’s Miami regional office, added, "Spinosa played a key supporting role in Rothstein’s Ponzi scheme by providing false comfort to investors that their money was safe and secure in the accounts at TD Bank. He enabled Rothstein to con investors into believing he couldn’t move their money when he could, and that the bank was holding money that it wasn’t."
TD Bank confirmed its agreement with the OCC, SEC and FINCEN in a statement sent to HousingWire.
"These agreements resolve each agency’s concerns regarding TD’s customer relationship with Scott Rothstein, a Florida lawyer who perpetuated a multi-million dollar fraud. TD Bank is pleased to resolve these regulatory concerns and to put the Rothstein matter behind us. TD works very closely with our regulators to ensure that it complies with all applicable laws and regulations," the statement read.
