Victims Accuse Wells Fargo Subsidiary of Turning Blind Eye to $35M Crypto Ponzi
Victims of an alleged crypto ponzi scam have filed a class-action lawsuit against a Wells Fargo subsidiary, claiming it ignored the activities of an employee accused of being one of the main perpetrators.
The plaintiffs said Wells Fargo Advisors did not inquire into the activities of James Seijas who, while working as a Wells Fargo financial adviser, allegedly defrauded 150 investors out of a total of $35 million.
According to the lawsuit, Seijas, along with two co-founders, Quan Tran, a certified general surgeon, and Michael Ackerman, who had previously worked at UBS Securities, formed a scheme called Q3 in 2017, ostensibly as a means to pool funds together to trade cryptocurrencies.
The Florida-based group encouraged investors, primarily doctors in Tran’s network, to participate by depositing funds. On initially raising more than $1 million, the group then began turning Q3 into a limited partnership and branched out by raising an additional $33 million from 150 investors all around the U.S., the suit alleged.
The plaintiffs alleged Q3 only invested $10 million into cryptocurrencies, with the rest going straight to the founders. A $4 million licensing fee, supposedly for a trading algorithm, actually ended up in their personal bank accounts, the suit said.
Seijas worked as a financial adviser for Wells Fargo Advisors for more than five years, only leaving in May 2019 according to his LinkedIn profile. The plaintiffs claimed in their lawsuit that he often told potential investors he worked at Wells Fargo to encourage them to invest in Q3.
The plaintiffs claim Wells Fargo should have checked on Seijas’ activity, as per their policy requiring employees to regularly report activities stemming from outside interests. Q3IRV says Wells Fargo Advisors did not inquire into Seijas’ role at Q3 during this time.
Although Q3 claimed it was averaging 15 percent monthly profits, the lawsuit says money not siphoned to personal accounts was mostly lost speculating on the market.
“Despite Defendants’ representation to potential and existing Q3 Investors that their virtual currency trading was highly successful and that Q3 Investors were free to withdraw the profits earned in their accounts after one year, Defendants did not trade virtual currencies successfully and most of Q3 Investors’ money was misappropriated or lost in trading,” reads the filing.
But most of the funds were apparently spent on lavish lifestyles. Seijas and his wife allegedly spent $3.5 million of investors’ money on a house in Florida. Tran allegedly spent $1.4 million on a yacht, and $260,000 on a Bentley; Ackerman reportedly purchased three cars, another $600,000 on personal security, and a further $100,000 on Tiffany jewelry.
The plaintiffs have accused Wells Fargo Advisors, as well as Seijas, Tran, and Ackerman, of fraud, negligence and unjust enrichment. The group also accuses the Q3 founders of counts including conspiracy to commit fraud and negligent misrepresentation. Wells Fargo is also accused, specifically, of one count of vicarious liability.
The plaintiffs’ call for a trial by jury. If successful, they say Wells Fargo Advisors should pay punitive damages as well as legal costs.
Seijas did respond to requests for comment. A Wells Fargo Advisors spokesperson said the company had nothing to add.