Crypto Scam Victim Files Shocking Lawsuits Against Two More Banks

The story of a crypto scam victim losing a massive $20 million is already alarming, but the plot thickens. Michael Zidell, the individual who recently sued Citibank claiming the bank overlooked obvious red flags in his case, has now filed similar lawsuits against two additional financial institutions: East West Bank and Cathay Bank. This development underscores the ongoing challenges faced by victims of sophisticated crypto fraud and raises critical questions about the role and responsibility of banks in preventing such losses.

How Did the Crypto Scam Victim Lose $20M?

Michael Zidell’s ordeal began, as many similar scams do, with an unsolicited contact online. According to the lawsuits, Zidell connected with a person named ‘Carolyn Parker’ on Facebook in early 2023. A romantic relationship allegedly developed, which soon led to discussions about lucrative investment opportunities in non-fungible tokens (NFTs). Parker reportedly claimed to have made millions in NFTs and directed Zidell to a specific trading platform.

Enticed by the promise of high returns, Zidell decided to invest. Over several months, he sent a total of 43 transfers exceeding $20 million to various bank accounts provided by the platform. The platform allegedly justified using multiple banks by claiming it was necessary to handle a large volume of customer deposits. However, by April 2023, the platform’s website vanished, taking Zidell’s investments with it.

This type of scheme is often described using terms like ‘romance scam,’ ‘rug pull,’ or ‘pig butchering scam’ – a particularly insidious form of fraud where scammers cultivate relationships over time before exploiting their victims financially.

Banks Sued Crypto: Allegations of Negligence

Zidell’s legal strategy targets the financial institutions that processed the transfers. His lawsuit against Citibank, filed previously, focused on 12 transfers totaling about $4 million. The new complaints against East West Bank and Cathay Bank cover the majority of the lost funds: nearly $7 million sent via 18 transfers to East West Bank and over $9.7 million via 13 transfers to Cathay Bank.

The core allegation against all three banks is similar: they allegedly ignored significant ‘red flags’ that should have triggered investigations into the suspicious activity. Zidell claims the banks had a fundamental duty to monitor transactions and exercise due care.

Key indicators that should have raised suspicion, according to the lawsuit, included the nature of the transactions themselves:

• Large, round numbers of funds being transferred.
• A high volume of transactions in a relatively short period.
• Funds being directed to accounts allegedly controlled by the scammers.

By allegedly failing to detect and act on these signs, Zidell argues the banks were negligent and materially aided the scammers.

The NFT Scam Lawsuit’s Core Claims

The lawsuits against East West Bank and Cathay Bank seek to hold them liable not just for negligence but also as ‘aiders and abettors’ of securities fraud. The complaint states, “Defendants through their recklessness, materially aided Parker and her co-conspirators by opening bank accounts, providing services including wire transfers and allowing them to be used to perpetrate the NFT Enterprise scam.”

Adding another serious dimension, the lawsuit against East West and Cathay also includes a charge of ‘aiding and abetting elder abuse.’ While Zidell’s age is not explicitly stated in the complaint, California law defines an elder as someone 65 years or older. This accusation suggests Zidell falls into this category, adding a layer of vulnerability that the banks allegedly failed to protect against.

What This Means for Future Crypto Scam Victims

These lawsuits highlight a growing area of legal contention: the extent to which traditional financial institutions can be held responsible when their services are used to facilitate cryptocurrency-related fraud. While banks have obligations under anti-money laundering (AML) and know-your-customer (KYC) regulations, the specific duty to identify and prevent funds being used in novel scams like romance or pig butchering schemes involving crypto platforms is still being tested in courts.

Zidell is seeking compensatory damages, legal costs, and interest, requesting a jury trial to determine the banks’ liability. The outcome of these cases could set important precedents regarding the due diligence expected from banks when handling transactions that exhibit characteristics common in online investment scams.

Conclusion: A Fight for Accountability

Michael Zidell’s decision to pursue legal action against multiple banks after falling victim to a significant romance crypto scam involving NFTs underscores the devastating impact of these schemes. By alleging that East West Bank and Cathay Bank, like Citibank before them, failed in their duty to detect suspicious activity, the crypto scam victim is pushing for accountability beyond the direct perpetrators of the fraud. These lawsuits serve as a stark reminder of the sophisticated nature of modern financial scams and the complex legal battles victims face in attempting to recover their losses.