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HSBC Bank of Negligence Certified in BC Overview:
- Who: HSBC Bank Canada is facing a class action lawsuit alleging negligence.
- Why: Jastram Properties Ltd. accuses HSBC of negligence and failing its duty of care by not warning other banks of a former customer’s fraudulent behavior and allowing her to continue her Ponzi scheme at other banks.
- Where: British Columbia
HSBC Bank Canada allowed a fraudster to continue her Ponzi scheme bilking investors out of more than $30 million by not investigating the scheme or warning other banks about her predatory behavior, a newly certified class action lawsuit alleges.
Jastram Properties Ltd. accuses HSBC of negligence and failing its duty of care by not warning other banks of Virginia Tan’s behavior and allowing her to continue her scheme at other banks after HSBC cancelled her accounts after discovering fraud.
The class action lawsuit was certified in the Supreme Court of British Columbia by the Honourable Mr. Justice Gomery, who said in his decision that “banks are the backbone of the Canadian economy. They are commercial enterprises that arguably have implied responsibilities to the public at large.”
“I am of the view that the duty of care alleged by Jastram is legally arguable. If the facts pleaded are true, the Bank owed Jastram a duty to take reasonable steps to stop the fraud,” Gomery wrote.
Jastram alleges in the class action that it was the victim of a fraudulent investment scheme orchestrated by Tan, in which investors were collectively bilked of more than $30 million.
“Ms. Tan encouraged Jastram and other investors to lend her money on very attractive terms for use in her factoring or bridge loan business. In fact, she was running a Ponzi scheme,” the lawsuit reads.
In 2011, Tan was making deposits to the HSBC Tan Accounts of approximately $1 million per month, and was making withdrawals from those accounts of around the same amount, the lawsuit claims.
“Most of the deposits in the HSBC Tan Accounts were large amount[s] in round numbers, and most of the withdrawals were cheques written to individuals for smaller round number amounts. These kinds of transactions are hallmarks of a Ponzi scheme.”
By early 2013, HSBC became concerned about the accounts’ activities and concluded after an investigation that Tan was using the HSBC Tan Accounts for fraudulent purposes, or it was highly likely she was. In response, it closed her accounts.
Tan then moved her banking to other banks, and Jastram lost almost $2 million in the following two years. Jastram argues that when the Bank learned of the fraud in 2013, it owed Jastram and other investors whose funds were passing through Tan’s accounts at HSBC a duty to take steps to prevent continuation of the fraud.
“Jastram says it was not sufficient for the Bank to terminate its relationship with Ms. Tan. In the circumstances, the Bank’s duty was to investigate, advise ‘appropriate authorities’ of the fraud, and warn other financial institutions whose customer’s funds were the subject of the fraudulent activity in the Bank’s accounts,” Gomery wrote.
Jastram is suing on behalf of other investors who were bilked out of money in Tan’s scheme.
Have you ever been involved in a Ponzi scheme? Let us know your experience in the comments section below!
Jastram is represented by P.R. Bennett and M.W. Mounteer.
The HSBC Canada Negligence Class Action Lawsuit is Jastram Properties Ltd. v. HSBC Bank Canada, Case No. S179117 in the Supreme Court of British Columbia.
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