8th Circ. Nixes $563M Verdict Against BMO Harris Over Ponzi

Court: BMO Harris Not Liable for Ponzi Scheme Losses

Key Points

• The 8th Circuit Court of Appeals overturned a $563 million verdict against BMO Harris Bank, finding that the bank was not liable for losses suffered by investors in a Ponzi scheme.
• The court held that BMO Harris did not have a duty to investigate the investment scheme or to warn investors about the risks involved.
• The court also found that the investors were not justified in relying on BMO Harris to protect them from the scheme.

The 8th Circuit Court of Appeals has overturned a $563 million verdict against BMO Harris Bank, finding that the bank was not liable for losses suffered by investors in a Ponzi scheme. The court held that BMO Harris did not have a duty to investigate the investment scheme or to warn investors about the risks involved. The court also found that the investors were not justified in relying on BMO Harris to protect them from the scheme.

The case stems from a Ponzi scheme perpetrated by Tom Petters, who was convicted of running a $3.6 billion Ponzi scheme in 2009. Petters used BMO Harris as his primary bank, and the investors alleged that the bank should have known about the scheme and taken steps to stop it.

However, the 8th Circuit Court of Appeals disagreed, finding that BMO Harris did not have a duty to investigate the investment scheme or to warn investors about the risks involved. The court noted that Petters was a sophisticated investor who had a long history of success in the business world. The court also found that the investors were not justified in relying on BMO Harris to protect them from the scheme, as they had access to the same information about the scheme as the bank did.

The decision is a significant victory for banks and other financial institutions, as it limits their liability for losses suffered by investors in Ponzi schemes. The decision also provides guidance for investors, who should be aware that they cannot rely on banks to protect them from all investment risks.

Implications for Banks and Investors

The 8th Circuit Court of Appeals' decision has several implications for banks and investors.

For banks, the decision provides them with some protection from liability for losses suffered by investors in Ponzi schemes. However, banks should still be aware of the risks involved in dealing with Ponzi schemes and should take steps to mitigate those risks.

For investors, the decision emphasizes the importance of conducting their own due diligence before investing in any investment scheme. Investors should not rely on banks or other financial institutions to protect them from all investment risks.