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Wells Fargo and the Alleged Seaman Holz Ponzi Scheme

Securities Lawyer Jonathan Kurta
By: Jonathan Kurta Author

According to a class-action lawsuit, Wells Fargo could have prevented a $300 million Ponzi scheme that targeted elderly investors. Seaman Holz, also known as National Senior Insurance, allegedly used Wells Fargo to perpetrate the scheme. The scheme allegedly affected approximately 1,000 investors.

The class action suit alleges that Wells Fargo did not catch the signs of fraud because the bank was motivated to go along with the scheme in order to enjoy the funds generated for the bank by account and transfer-related revenue. According to the suit, the in-and-out transactions should have tipped Wells Fargo off to the fraud.

Wells Fargo faces a lawsuit in Florida over the same allegations.

What is a Ponzi Scheme?

In a Ponzi scheme, fraudsters promote their fake investment opportunity as a chance to earn attractive returns. But instead of investing the investor’s funds in a real opportunity, the scammers keep the money for themselves, which they often use to fund lavish lifestyles. To keep up appearances, the Ponzi schemers use new investments to pay previous investors, using the influx of cash to make it appear as though the investors are earning a return on their investment.

How Did the Wells Fargo Ponzi Scheme Work?

In this case, the alleged Ponzi scheme revolved around promissory notes. The promissory notes would be repaid, according to the alleged scammers, by payments from Stranger-Originated Life Insurance (STOLI). STOLIs are life insurance policies that the policyholder sells to a third party. The new owner pays the premiums and then receives the final death benefit payout. In this case, however, the STOLIs did not provide the payouts needed to pay investor returns.

In addition to making classic Ponzi scheme payments, the suit also alleged that the perpetrators misappropriated money by imposing fictitious fees and expenses.

There are three facts that the suit alleges Wells Fargo must have known:

  • The STOLIs were not being held as collateral with third-party agents, as the alleged scammers alleged that they would be.
  • The promissory notes were not registered.
  • The individuals offering these investments were not registered.

Securities should be registered with the SEC, and individuals who recommend securities should be registered by either the SEC or FINRA.  

According to the suit, Wells Fargo breached its fiduciary duty by failing to note the signs of a scam. Banks owe their customers a fiduciary duty to put their client’s interests ahead of their own.

What Can I Do If I Lost Money in a Ponzi Scheme?

If a registered financial professional recommended an investment that turned out to be a Ponzi scheme, you should speak with a securities attorney. Our securities attorneys offer free case evaluations. Call (877) 600-0098 or email Do not hesitate to contact us–there is a limited timeframe when investors are allowed to file a claim.

Unfortunately, cases that involve unregistered individuals may have to seek other remedies, as in the case of this class action lawsuit.  

Securities Lawyer Jonathan Kurta
Written by: Jonathan Kurta

Jonathan Kurta is an accomplished securities attorney and a founding partner at Kurta Law.