By Pradeep Saran, September 21,2023
In August, a lawsuit was filed accusing a local bank of knowingly participating in a multi-million dollar Ponzi scheme. This scheme came to light in the aftermath of a legal action initiated by the U.S. Securities and Exchange Commission (SEC) against the estate of Stephen Swensen, a respected financial advisor who tragically took his own life on June 6, 2022.
The SEC’s report alleges that Swensen had embezzled $30 million from approximately 50 clients over a ten-year period. Court documents reveal that the Bank of Utah was where Swensen conducted most of his financial dealings with clients.
The recent lawsuit, filed on behalf of a dozen former clients of Swensen, alleges that the bank’s Vice President and Senior Trust Officer had suspicions about Swensen’s activities but failed to report them as required by federal law. Consequently, the lawsuit claims that the bank played a crucial role in facilitating Swensen’s embezzlement of at least $15 million.
The lawsuit seeks reimbursement for the financial losses suffered by Swensen’s former clients, many of whom were unaware of the fraud until after his suicide. Swensen had convinced clients to open Self-Directed Individual Retirement Accounts (IRAs) and transferred control of these accounts to himself as their representative. He then used these accounts to access clients’ retirement savings.
The lawsuit also alleges several irregularities, including the bank accepting improperly notarized authorization forms, circumventing the Medallion Signature Guarantee requirement, transferring funds to Swensen’s fake investment firm, Crew Capital, and concealing penalties and large withdrawals. Additionally, the bank is accused of forging documents related to withdrawal penalties and allowing Swensen to pay clients’ account fees in bulk through his Crew Capital account.
Despite these allegations, the Bank of Utah denies any wrongdoing, asserting that the accounts were self-managed and legally authorized to be controlled by Swensen. The bank claims it had no knowledge of fraudulent activity and emphasizes that it strictly adheres to federal IRA regulations.
This case underscores the importance of vigilance in financial matters, urging individuals to regularly review their statements, report suspicious activities to regulatory authorities like the SEC or FINRA, and seek assistance from law enforcement agencies when encountering potentially fraudulent schemes.