Ken Liem, a California resident, has filed a lawsuit against three major banks, accusing them of negligence in enabling a cryptocurrency investment scam. Liem claims he was defrauded of $986,000 after being targeted on LinkedIn in June 2023 by a scammer promoting crypto investment opportunities. Over six months, Liem wired substantial funds through Wells Fargo to accounts held by Hong Kong-based entities.
Liem’s ordeal escalated when his cryptocurrency account was frozen under false allegations of money laundering. To regain access to his funds, scammers demanded he pay a fake IRS tax—an established tactic used to maximize financial extraction from victims before vanishing.
The lawsuit names three financial institutions as defendants:
- Chong Hing Bank Limited (Hong Kong-based)
- Fubon Bank Limited (Hong Kong-based)
- DBS Bank (Singapore-based, with a Los Angeles branch)
Allegations of Negligence and Non-Compliance
Liem accuses these banks of failing to follow mandatory “Know Your Customer” (KYC) and anti-money laundering (AML) protocols as required by the U.S. Bank Secrecy Act. The lawsuit asserts that the banks:
- Failed to Verify Identities: Inadequate due diligence on account holders allowed fraudsters to operate unchecked.
- Neglected Business Verification: The nature of the businesses linked to these accounts was not properly investigated.
- Ignored Complaints: Liem reported the scam in August 2024, but the banks either disregarded his concerns or denied accountability.
The lawsuit contends that these financial institutions enabled the transfer of illicit funds from the U.S. to Asian accounts tied to organized scams by ignoring suspicious transactions.
Liem's case highlights the growing debate over banks' responsibility in preventing fraud. While lawsuits of this nature are uncommon, they are not without precedent. For instance:
- January 2024: Two elderly victims of IRS impersonation scams sued JPMorgan Chase for allowing large international transfers without adequate scrutiny.
Globally, different approaches are being adopted to address fraud:
- United Kingdom: New regulations require banks to reimburse scam victims up to £85,000 ($106,426) within five days, though banks have pushed back against raising this cap.
- Australia: Proposed legislation could fine banks, telecom providers, and social media platforms for failing to prevent scams.
- United States: The Consumer Financial Protection Bureau (CFPB) has taken legal action against Bank of America, Wells Fargo, and JPMorgan Chase for not preventing fraud on the Zelle platform, which has resulted in $870 million in losses since 2017.
As global authorities and financial institutions grapple with accountability measures, victims like Ken Liem face significant challenges in recovering their stolen funds. This lawsuit underscores the urgent need for stronger fraud prevention policies and stricter enforcement of compliance standards within the banking sector.
