URGENT >> BULLETIN >> MOVING: Keith Simmons’ Forex Ponzi Caper Leads To Criminal Charges And Deferred Prosecution Against North Carolina Bank; CommunityONE Bank Charged With Not Maintaining Effective Anti-Money Laundering Program

BULLETIN: Federal prosecutors say the collapsed Forex Ponzi scheme operated by Keith Franklin Simmons put an undercapitalized  North Carolina bank with 45 offices in 38 communities in harm’s way.

In a dramatic announcement, Justice Department officials said CommunityONE Bank N.A of Asheboro, N.C., turned a blind eye to Simmons and did not file a single Suspicious Activity Report despite the fact the scheme sent out red flags for more than two and a half years.

CommunityONE lost 16 percent of its value because of the scheme, the Justice Department said. Had the bank collapsed, it would have cost the FDIC insurance fund $500 million, prosecutors added.

In a deferred prosecution agreement, the bank has been charged criminally with failing to maintain an effective anti-money laundering program. The agreement, officials said, would enable the bank to recapitalize and execute a merger plan while providing $400,000 to help the Ponzi victims recover.

“Banks asleep at the switch need to wake up,” said U.S. Attorney Anne Tompkins of the Western District of North Carolina.  “Federal law requires banks to implement a robust and proactive anti-money laundering program to detect fraud and protect the public from harm.  This bank’s failure to detect and report a Ponzi scheme cost it 16 percent of its value.  Other financial institutions should heed this warning:  the Bank Secrecy Act applies to more than just drug and terrorist financing.”

Simmons, prosecutors said, operated his massive scam “almost entirely through an account at the bank.”

Between April 2007 and September 2009, prosecutors said, Simmons used CommunityONE to deposit more than $35 million in investor funds and withdraw at least the same amount.

Even though “hundreds” of suspicious transactions occurred, the bank chose to be willfully blind, the Justice Department said.

“CommunityONE Bank turned a blind eye to criminal conduct occurring under its nose,” said Assistant Attorney General Lanny Breuer.

The Justice Department made the announcement from Washington, and Breuer said the bank was implementing a new program and beginning the process of “righting its wrongs.” The charges will be dismissed in two years if the bank complies with its agreement.

Records at CommunityONE, prosecutors said, showed that Simmons diverted more than $2 million to other accounts at the bank “to operate his other businesses.”

Meanwhile, he “diverted nearly $800,000 in cash withdrawals, gift cards and transfers to his personal account with the bank” and “diverted numerous payments to support his luxurious lifestyle, including payments for private jets, vehicles and gifts,” prosecutors said.

Simmons, who was convicted of securities fraud, wire fraud and money laundering last year, operated a company known as Black Diamond Capital Solutions LLC. He faces a maximum sentence of 80 years in federal prison. Read more about Black Diamond here.

The action against CommunityONE was brought by elements of the interagency Financial Fraud Enforcement Task Force created by President Obama in November 2009.

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6 Responses to “URGENT >> BULLETIN >> MOVING: Keith Simmons’ Forex Ponzi Caper Leads To Criminal Charges And Deferred Prosecution Against North Carolina Bank; CommunityONE Bank Charged With Not Maintaining Effective Anti-Money Laundering Program”

  1. If CommunityONE had failed because of the ponzi scheme, would it have been a domino effect?

    CommunityOne is owned by FNB United Corp.
    http://www.bizjournals.com/charlotte/news/2011/03/18/fnb-united-posts-higher-losses.html

    FNB United Corp., the parent company of CommunityOne Bank and Dover Mortgage Co., has posted a fourth-quarter net loss of $30.4 million, or $2.67 per diluted share, after losing $28.9 million, or $2.53 per diluted share, a year earlier.

    FNB (NASDAQ:FNBN) has been hit particularly hard by the real estate crash and recession, and has been operating under a consent order from the federal Office of the Comptroller of the Currency since July. That order requires the bank to take actions to improve asset quality and maintain minimum capital levels.

    If ComminityOne went down, could it have taken it’s parent as well? Quite possibly.

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  2. And the next time some ponzi pimp tries to tell you “it’s our own money, what do you care if we lose it?” remind them that when they start using federally insured banks, it’s your money and my money, when the FDIC has to bail out the bank.

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