BOA lawsuit dismissed....
One of the last and best hopes for victims of Nicholas Cosmo’s alleged Ponzi scheme to recover their lost millions has fizzled in court.
Judge Arthur Spatt dismissed three lawsuits filed against Bank of America and two commodities brokerages that claimed the companies aided Cosmo in ripping off more than 5,000 investors in his Hauppauge-based investment firm, Agape World. In the decision handed down on Jan. 29, the judge ruled the plaintiffs hadn’t proved that the bank and the trading firms had knowledge of the alleged $400 million fraud and shouldn’t be held liable.
Attorneys for the victims argued that the bank and the trading firms failed to adequately vet Cosmo, who was barred for life from associating with anyone in the securities business as a result of his first conviction for fraud in 1998. The feds say Cosmo lost nearly $100 million in online futures trading with about a half-dozen brokerages in the last couple of years. The bank was the conduit for the millions paid to the stock traders that was supposed to go to bridge-loan borrowers, according to Agape’s business model.
But Cosmo only made loans for less than $25 million of the $400 million he took in from investors. The feds say he blew through the rest and paid at least $55 million to about a dozen Agape sales reps.
Agape World took in so much money between 2006 and 2008 that Bank of America employees were stationed there to facilitate the transfers of millions between customers. Agape investors have told LIBN that a woman who identified herself as a bank employee called them and recommended Agape as a good investment. She even suggested that investors take out home equity loans from her bank and put it into Cosmo’s company, where they would get interest rates as high as 14 percent in just six weeks.
The dismissal of the three lawsuits doesn’t bode well for similar suits that are still pending against the bank and stock trading firms. And with little Agape assets left to recover, victims were hoping the courts would hold the bank responsible, because they feel it acted irresponsibly with their accounts.
Agape victim Dom DiColandrea said the judge’s dismissal sets a new precedent for “corporate criminals” to avoid prosecution or penalty when failing to warn the public of any danger or suspicious activity.
“I think it’s a sad statement about our system of justice when a United States district court judge rules in favor of corporate willful deception over the unsuspecting consumer,” DiColandrea said. “The honorable Judge Spatt has done exactly that. He spat in the face of every innocent victim with this unfathomable ruling.”
Spatt left open the possibility of revisiting the claim against the bank, but only if further evidence is found that it helped carry out the alleged fraud or that Bank of America breached its fiduciary duty to its customers.
Spatt was on the bench for the prosecution of Cosmo’s first fraud, where about 10 victims lost about $170,000 to the then 26-year-old stock broker. Cosmo had put their money into his own Charles Schwab account and sent his clients phony statements to cover up the thefts. The judge sentenced him to 21 months in the Allenwood Federal Corrections facility and ordered Cosmo to undergo extensive gambling therapy. The swindler founded Agape World upon his release in August 2000.
Arrested on Jan. 26, 2009, Cosmo is currently being held at the Nassau County jail in East Meadow. His next court appearance is scheduled for March 26. If convicted this time, prosecutors say Cosmo faces up to 30 years in prison.
Long Island Business News
- ▼ 2010 (11)