Bank of America might have aided convicted felon Nicholas Cosmo in operating a ponzi scheme which fraudulently lost almost 400 million dollars of investor monies.

This is an ongoing investigation and pending class action lawsuit against Bank of America, alleging that the Bank of America was complicit in a ponzi scheme operate by Nicholas Cosmo.

Nicholas Cosmo is a convicted felon. After completing a nearly two year stint in federal prison, Cosmo founded Agape World, Inc., a Long Island company specializing in making short-term “bridge” construction loans carrying high interest rates. Using a network of brokers, Cosmo gathered some $400 million from investors who wanted to realize attractive rates of returns. It was a fraud as. Cosmo re-sold the same investments hundreds, if not thousands, of times.

The class action lawsuit alleges that Bank of America worked directly with Cosmo and his companies to help direct Bank of America customers to Cosmo investments and to stamp a perceived legitimacy to Cosmo’s operation.

The class action lawsuit further alleges that representatives of Bank of America worked directly out of Cosmo’s West Hempstead office, which was about 30 miles from the branch where Agape and Mr. Cosmo maintained their bank accounts. Bank of America provided on-site representatives at Cosmo’s office including installing bank equipment and computer systems that allowed direct access to the bank’s accounts and systems, the suit said. The class action complaint states: “Essentially, Bank of America established a fully functional bank branch manned by its own representatives within Agape’s offices, which is contrary to normal banking practices,” the lawsuit said. As a result, the bank’s representatives had “actual knowledge” that Mr. Cosmo was “diverting money to his own account” and “engaging in virtually no legitimate business whatsoever.”

Two specific allegations of note in the class action complaint: First the class action lawsuit alleges that Bank of America apparently provided Cosmo access to information about the cash balances of Agape investors who had accounts with Bank of America. Agape investors routinely received aggressive solicitations from Cosmo when their balances swelled. So much for client confidentiality. Second, Although Bank of America ostensibly has “know your customer” rules and procedures, the class action complaint alleges that employees were routinely pressured to ignore obvious red flags such as a customer whose background checks includes securities fraud.

Cosmo surrendered to authorities at a Long Island train station in January in connection with a suspected Ponzi scheme involving what Mr. Cosmo called “private bridge loans” that promised investors returns of 48 percent to 80 percent a year. Many of his 1,500 investors were blue-collar workers and civil servants.