Three US banks are facing a class action lawsuit over their alleged involvement in a Ponzi scheme.
Community Financial Services Bank, Mechanics Bank and RABO AgriFinance are accused of knowingly or negligently enabling a Ponzi scheme orchestrated by Kentucky farmer and businessman Brian McClain, reports WPSD Local 6.
McClain is accused of stealing millions of dollars from investors in Graves County by masterminding a fictitious cattle investment scheme.
A lawyer for the plaintiffs, Mark Bryant, says McClain promised high guaranteed returns on a cattle business, with investors losing an enormous amount of money.
“In reality, the complaint states, the promised cattle never existed, and the returns that were paid were paid using new investor funds in classic Ponzi fashion.”
The lawsuit alleges that lax oversight and fraudulent transfers by the three banks helped sustain McClain’s Ponzi scheme for years. The three banks “allegedly turned a blind eye to hundreds of millions of dollars in irregular and suspicious transactions” initiated by McClain and his supposed cattle business.
RABO AgriFinance reportedly gave McClain over $70 million in credit even though the lender had concerns over the businessman’s actual cattle ownership and poor keeping of records.
Community Financial Services Bank reportedly allowed McClain to obtain more than 100 days of overdraft period and failed to act despite evidence of suspicious fund transfers. The bank was also aware of McClain’s financial position prior to the alleged Ponzi scheme but took no action even after the state of his finances changed drastically, according to the report.
Mechanics Bank also allegedly allowed McClain overdrafts.
McClain committed suicide in April of 2023 and the alleged Ponzi scheme was uncovered soon after his death.
The class action lawsuit against the three banks is seeking compensatory and punitive damages.
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