The Securities and Exchange Commission on Monday charged TD Bank and a former executive with violating securities laws in connection with a massive South Florida-based Ponzi scheme conducted by Scott Rothstein, who is now serving a 50-year prison sentence.
The SEC alleges that TD Bank and its then-regional vice president Frank A. Spinosa defrauded investors by producing misleading documents and making false statements about accounts that Rothstein held at the bank and used to perpetuate his scheme.
Without admitting or denying the SEC's findings, TD Bank agreed to pay $15 million and cease and desist from committing or causing any violations of Sections 17(a)(2) and (3) of the Securities Act. The SEC filed a complaint against Spinosa in U.S. District Court for the Southern District of Florida.
The SEC coordinated the filing of its cases with the Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network, which today announced their own actions against TD Bank.
The SEC says that Spinosa falsely represented to several 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. Spinosa also orally assured investors that certain accounts held balances totaling millions of dollars, but each account actually held zero to $100.
"Financial institutions are key gatekeepers in the transactions and investments they facilitate and will be held to a high standard of accountability when their officers enable fraud," said Andrew J. Ceresney, co-director of the SEC's Division of Enforcement, in a statement. "TD Bank through a regional vice president produced false documents on bank letterhead and told outright lies to investors, failing in its gatekeeper role."
