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Regulation and Compliance > Litigation

Interactive Brokers Hit With Class-Action Suit Over $23M Ponzi Scheme

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What You Need to Know

  • The firm recognized Haena Park’s account was used to conduct a fraud.
  • It disregarded its own compliance department’s red flags, according to the suit.
  • The firm's participation in the scheme came to light when the SEC, FINRA and CFTC all simultaneously announced a joint action against IB.

Electronic brokerage Interactive Brokers was hit with a class-action lawsuit Monday for allegedly aiding and abetting a $23 million Ponzi scheme.

According to the lawsuit, filed in the United States District Court for the Northern District of California, the firm recognized Haena Park’s account was used to conduct a fraud, identifying her suspicious activity in reports reviewed by compliance analysts more than a dozen times during the life of the scheme.

Park, according to BrokerCheck, is a previously registered broker who also worked at Morgan Stanley and Goldman Sachs.

“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 complaint states.

Through her Interactive Brokers’ account, Park lost over $14 million of her investors’ contributions before the scheme was discovered by regulators and Park was arrested, the complaint states. She was sentenced to three years in prison in 2018.

In 2020, IB’s participation in the scheme came to light when the Securities and Exchange Commission, the Financial Industry Regulatory Authority and Commodity Futures Trading Commission “all simultaneously announced a joint action against IB for its role in the fraud and for other regulatory compliance violations,” the suit states.

In August 2020, Interactive Brokers agreed to pay the SEC $38 million over repeated failures to file suspicious activity reports.

FINRA fined Interactive Brokers LLC $15 million on Aug. 10, 2020 for widespread failures in the firm’s anti-money laundering (AML) program, which persisted for more than five years.

For the first time in the CFTC’s history, it found an investment firm liable for violations of the Bank Secrecy Act, according to the complaint. The action seeks to recover from IB the damages sustained as a result of the firm’s wrongdoing and substantial assistance in the Park scheme.

Interactive Brokers said in a statement shared with ThinkAdvisor that it had “not yet been served with this complaint.”

Interactive Brokers Group LLC is one of the world’s largest brokers. It has over $9 billion in equity capital, has more than a million client accounts in more than 200 countries and territories and executes about 2.5 million trades per day.

Its subsidiary, IB, is the electronic brokerage subsidiary of IBG LLC and is registered as a broker-dealer with the SEC and as a futures commission merchant with the CFTC.

(Image: Shutterstock)