Last week, JPMorgan Chase was the big bank in regulatory crosshairs. On Monday, TD Bank was the target, hit with $52.5 million in fines for violations of the Bank Secrecy Act and the actions of a former executive who helped facilitate a Ponzi Scheme.

The Office of the Comptroller of the Currency and the Treasury Department's Financial Crimes Enforcement Network levied a $37.5 million penalty against TD Bank for violations of the Bank Secrecy Act. The SEC ordered the bank to pay an additional $15 million penalty

Investigators found that from April 2008 to September 2009, the bank failed to file Suspicious Activity Reports (SARs) on activity in accounts belonging to Rothstein Rosenfeldt Adler, the Florida law firm through which Scott Rothstein, now serving a 50-year prison sentence, ran a $1.2 billion Ponzi scheme. “The failures to file SARs were significant and egregious for a number of reasons, including the number of alerts generated by these accounts and the volume and velocity of funds that flowed through them,” an OCC statement says. 

According to the SEC's order and complaint, Rothstein claimed to represent plaintiffs who had reached legal settlements that were confidential and payable over time by large corporate defendants. His pitch was that the plaintiffs were willing to sell their periodic payments to investors at a discount in exchange for one lump-sum payment. The legal settlements were fake, however, and the plaintiffs and defendants were not real.  As part of the scheme,  Rothstein opened 22 accounts at Commerce Bank and TD Bank (the two merged in 2008) from November 2007 to October 2009. 

The SEC further alleges that TD Bank and its then-regional vice president, Frank A. Spinosa, defrauded investors by producing a series of misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme. 

Spinosa falsely represented to investors that TD Bank had restricted the movement of the funds in these accounts when, in fact, Rothstein could transfer investor money however he desired.  He also verbally assured investors that certain accounts held balances totaling millions of dollars, when each account actually held less than $100.

The SEC filed a complaint against Spinosa in U.S. District Court for the Southern District of Florida. Without admitting or denying the SEC's findings, TD Bank agreed to settle the SEC's charges in an administrative proceeding and pay $15 million.

The Bank ultimately provided more than $600 million in restitution to investors impacted by Rothstein's Ponzi scheme. 

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