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A central Iowa college professor is suing Wells Fargo and other banks, alleging their lack of due diligence resulted in him losing more than $700,000 in a cryptocurrency scam.
Attorneys for Joseph Harris, 75, of West Des Moines, filed the lawsuit late last week in U.S. District Court for Southern District of Iowa.
The defendants include Wells Fargo Bank; Hang Seng Bank Ltd. of Hong Kong; Tien Phong Commercial Joint Stock Bank, also known as TPB, of Hanoi; Vietnam Technological and Commercial Bank, also known as Techcombank, of Hanoi; Tu Chuong Niem, a resident of California; and Trellian Proprietary Ltd. of Melbourne.
The case involves what attorneys for Harris say is a type of cryptocurrency fraud known as “pig butchering,” a multibillion-dollar crime that has victimized people around the world. “Pig butchering” generally describes investment scams in which the victims are lured into parting with increasingly large amounts of money while being “fattened” through phony earnings reports before they’re “butchered” through the depletion of all their wealth.
In his lawsuit, Harris claims that in June 2023, someone operating under the name Xinyi Deng contacted him through LinkedIn and WhatsApp as part of a massive electronic trolling operation designed to locate pig-butchering targets. Deng, who claimed to be living in Iowa, presented Harris with a purported opportunity to invest in gold through cryptocurrency.
In the lawsuit, Harris claims he agreed to invest in the scheme through several large wire transfers due to Deng’s “assurances of significant returns.” Deng or one of her associates allegedly instructed Harris to lie about the stated purpose of the wire transfers — investing in gold — and offer his banks a less suspicious rationale for the withdrawals, such as purchasing business equipment or sending money to a friend who was in need of help.
Lawsuit: Bankers had their ‘heads in the sand’
In June 2023, after Harris made two initial “investments” totaling $16,500, Wells Fargo allegedly gave Harris a physical device called a “security key” that enabled him to make immediate wire transfers whenever he wanted, from home, without physically going into a Wells Fargo bank.
In the days that followed, Harris allegedly executed additional wire transfers of $25,000, $85,000, $230,000, $50,000, $15,000 and $95,000.
At no time, the lawsuit claims, did Wells Fargo ever ask Harris any questions about the transfers, such as why his friend in Vietnam needed more than the average lifetime salary of a Vietnamese citizen or why the money was being routed to several different people.
In September 2023, Harris transferred an additional $199,712 from an account he had with Chase Bank. Chase is not a defendant in the lawsuit.
Throughout the transfer process, Harris used an online platform located at fuexweb.net, which was hosted by Trellian, to view the purported returns on his investment. Harris only discovered the fraud after attempting to transfer funds out of his Fuex account back to one of his bank accounts in the U.S. He was unable to access the money and Deng stopped communicating with him.
Wells Fargo and Chase later attempted to retrieve the money, but without success, the lawsuit claims.
The lawsuit also claims that Fuex Group Ltd. is run by Niem, and that Hang Seng, TPB, and Techcombank failed to comply with know-your-customer banking laws and anti-money-laundering laws when they opened accounts for those involved in the fraud. That failure, the lawsuit claims, amounts to substantial assistance to the scheme and a “willful blindness” to criminal activity.
As an example, the lawsuit alleges the three financial institutions failed to have the signatory on the accounts physically appear in person for verification of their identity. That failure may be attributable to financial incentives the banks have in place for account managers tasked with opening new business accounts, the lawsuit claims.
In court filings, attorneys for Harris say a simple review of the accountholders would have revealed “a complete lack of credible evidence” that their business activities were lawful or legitimate.
“Their decision to bury their heads in the sand and refuse to conduct any due diligence to verify the identity of their potential new customers amounts to aiding and abetting fraud,” the lawsuit alleges.
Lawsuit seeks punitive damages
The lawsuit focuses on the federal Bank Secrecy Act and various know-your-customer and anti-money-laundering regulations. It alleges that the Bank Secrecy Act applies to the three Chinese and Vietnamese defendant banks because transactions with Harris and other Americans were processed through U.S. institutions — in Harris’ case, Wells Fargo and Chase Bank, from which the wire transfers were issued.
Harris is suing Niem for alleged fraud and unjust enrichment, and is suing Hang Seng, TPB, Techcombank and Trellian for aiding and abetting fraud, conversion, unjust enrichment and negligence.
Wells Fargo is being sued for unjust enrichment and alleged breach of contract related to the bank’s duty to exercise “ordinary care” in processing transactions. The lawsuit claims state and federal laws, as well as Wells Fargo’s own policies, require the bank to identify and investigate suspicious transactions by elderly customers and to intervene when that investigation yields evidence of financial exploitation.
Harris “liquidated massive amounts of his retirement funding” by making several high-dollar, round-number wire transfers to Vietnam, the lawsuit alleges, adding that “reasonable or ordinary care required Wells Fargo to investigate the highly suspicious wire transfers further, freeze the account, and take the steps necessary to protect his assets.”
Not only did Wells Fargo ignore the red flags that suggested fraud, it also facilitated the scheme by providing Harris with the security-key device to transfer money immediately without any supervision or authorization by a Wells Fargo employee, the lawsuit states.
In addition to seeking actual damages of $716,212, the lawsuit seeks unspecified punitive damages against the defendants, arguing they “must serve as an example” that fraud will not be “tolerated in Iowa.”
The defendants have yet to file a response in the case. Wells Fargo declined to comment on the lawsuit.
Fort Dodge man says he lost $232,793
In 2023, Fort Dodge man, Brian Hoop, filed a federal lawsuit over an alleged pig-butchering cryptocurrency scam. Hoop alleged that in September 2022, he received a text message on his cell phone from an unfamiliar phone number. The sender of the text introduced herself as “Emma,” and over the next six months, Hoop and “Emma” continued to text daily and eventually exchanged intimate messages and photos.
Three months into their virtual relationship, in December 2022, “Emma” told Hoop she created substantial income for herself through carefully timed trades in cryptocurrencies and volunteered to assist Hoop in executing his own trades on what appeared to be a legitimate cryptocurrency exchange called Energise Trade.
Over the next several weeks, Hoop liquidated his retirement and savings accounts, borrowed money from a bank and from his mother, and ultimately delivered $232,793 to Energise Trade, believing his investment had resulted in $1.1 million in returns.
When he attempted to access those funds, he was asked to pay an additional $100,000 as payment of taxes. After he refused, “Emma” attempted to extort money from Hoop by threatening to expose his intimate conversations and photographs to others, and by threatening to torture him and harvest his organs so they could be sold on the black market.
The lawsuit accuses the individual known only as “Emma” and 20 “John Does,” all believed to reside in China, with conversion, racketeering, conspiracy, unauthorized disclosure of intimate images, and negligent infliction of emotional distress. Also named as a defendant is a Delaware corporation named MEXC Global, which allegedly controls the accounts into which Hoop’s money was deposited.
The lawsuit is still pending in federal court.