Zayed v. Associated Bank (Eighth Circuit)

Perpetrators of a Ponzi scheme used accounts at several financial institutions in Minnesota, including Associated Bank, N.A. After the Ponzi scheme was uncovered, the perpetrators were prosecuted and jailed. The Receiver appointed to marshal the perpetrators’ funds for defrauded investors—and to recover sums from “winning” investors—alleged that the Bank knew about the scheme and aided it. The district court dismissed the lawsuit, finding that the Receiver had failed to allege awareness of or substantial assistance to the fraud. The appeal before the Eighth Circuit presents several important questions, including whether a bank may be liable for aiding and abetting on the theory that “red flags” about customer accounts establish actual knowledge that customers are breaking the law; and whether a federal Receiver that stands in the shoes of the perpetrators is thereby barred from asserting claims under the in pari delicto defense.