Interactive Brokers Sued by Trader for Allegedly Involvement in A Ponzi Scheme

A year after Interactive Brokers was fined $38 million for numerous AML failures, another client has filed a lawsuit against the broker for allegedly aiding and abetting the fraudulent activity that resulted in the penalty.

The client, named Benjamin Chang, has filed a lawsuit against Interactive Brokers in California Northern District Court, seeking real damages he and the (potential) class suffered, as well as additional damages caused by IB's aiding and abetting fraud and aiding and abetting violation of fiduciary obligations.

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The plaintiff claims that he and the class were victimized by a Ponzi scheme carried out by Haena Park, an IB customer, with Interactive Brokers' knowledge. Park developed the plan by fraudulently soliciting funds from Plaintiff and members of the class, then misusing those monies for her personal gain and making bogus dividend payments to other investors caught up in the scam.

Park's account was reportedly used to commit fraud, according to IB, which identified her unusual activity in reports examined by compliance experts more than a dozen times over the scheme's life cycle. IB ignored its own compliance department's warning signals and stated internal compliance standards to help Park, a profitable IB customer, continue the scam through its brokerage services rather than analyze the behavior, freeze the account, and denounce Park to the police.

Before the scam was detected by regulators and Park was incarcerated, she already lost over $14 million of her investors' money through her account at IB. In 2018, she was sentenced to three years in jail. The SEC, FINRA, and CFTC all launched a combined action against IB for its role in the fraud and other regulatory compliance violations in 2020, revealing IB's involvement in the scam.