California Lawsuit Targets Major Banks Over Alleged Cryptocurrency Fraud
Background on the Case and Allegations
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A recent lawsuit filed by a Californian named Ken Liem has brought significant attention to compliance issues within the banking sector. The case, lodged against three notable Asian banks—Fubon Bank, Chong Hing Bank, and DBS Bank—alleges their involvement in a $1 million cryptocurrency scam.
The legal action, initiated on December 31, 2024, in a California district court, accuses these banks of neglecting essential financial compliance protocols. Specifically, it argues that the banks failed to perform adequate Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, potentially allowing the fraudulent activity to proceed unchecked.
Compliance Failures and Financial Oversight Concerns
The saga dates back to June 2023, when Liem was lured into a seemingly legitimate cryptocurrency investment scheme via LinkedIn. Over the ensuing months, he transferred substantial sums into accounts with the three banks in question. These funds were later redirected to third-party accounts allegedly managed by the fraudsters.
According to Liem’s legal representatives, the banks failed to execute basic compliance checks that could have exposed irregularities, thereby flagging these accounts as suspicious and averting significant financial loss.
The lawsuit asserts that the involved banks overlooked standard KYC and AML protocols, which are crucial for preventing financial misconduct. An elementary review might have uncovered discrepancies, such as the absence of verifiable business activity for the account holders. The accusation is that by ignoring clear red flags, the banks inadvertently facilitated the scam.
Violation of Regulatory Obligations
The lawsuit further claims that the banks breached the US Bank Secrecy Act (BSA), which obligates financial institutions to maintain transaction records and report any suspicious activities to the Financial Crimes Enforcement Network (FinCEN).
As DBS Bank operates a branch in California, and transactions from Fubon and Chong Hing were processed via Liem’s Wells Fargo account, the lawsuit contends that these banks are subject to US regulatory oversight. This forms the foundation of the legal argument that the banks were legally required to act on the transactions’ dubious nature.
Legal Implications and Rising Threat of Cryptocurrency Scams
The lawsuit also implicates Hong Kong-based business entities—Richou Trade, FFQI Trade, Xibing, and Weidel—as intermediaries in channeling Liem’s funds to the fraudsters’ accounts. These entities are accused of facilitating the money laundering process.
This case underscores the ongoing vulnerabilities within the global financial system, particularly concerning cross-border cryptocurrency fraud. It prompts critical questions regarding the responsibilities of financial institutions in preventing such scams and complying with international financial regulations.
If the lawsuit advances, it could potentially establish a precedent for holding banks accountable for failing to identify and report suspicious activities in cryptocurrency transactions.
