Tuesday, February 26, 2013
Medical Capital aggressively marketed its promissory notes in "private placements" to thousands of unsophisticated investors from 2003-2007, in what was almost certainly a Ponzi scheme. Medical Cap collapsed in 2009 after the SEC charged it with fraud, and investors have brought numerous lawsuits and arbitration proceedings against brokers and other intermediaries. Yesterday the Bank of New York Mellon Corp., a trustee for Medical Cap notes, agreed to pay $114 million to investors. Investors claimed that Med Cap executives used the account as their personal piggy bank and the bank received substantial fees for its services. A lawsuit against another trustee, Wells Fargo, continues.
Investment News, Bank of NY Mellon to pay $114M in private-placement settlement