BNY Mellon Wins Dismissal of Investor Lawsuit Stemming from Cryptocurrency Scam

Paul, Weiss won the dismissal of a high-stakes investor class action against The Bank of New York Mellon filed in the wake of a pyramid scheme involving purported cryptocurrency OneCoin.

U.S. District Judge Valerie Caproni dismissed all claims against BNY Mellon, ruling that OneCoin investors had failed to show that the bank had any actual knowledge of the fraud or provided substantial assistance to the convicted fraudsters.

Investors filed suit in the Southern District of New York in 2018, adding BNY Mellon as a defendant last year. In their amended complaint, plaintiffs alleged that the bank aided and abetted the OneCoin fraud and engaged in commercial bad faith by providing correspondent banking services to the perpetrators of the alleged scheme, thereby facilitating the fraudsters’ laundering of over $400 million in illicit proceeds.

In her dismissal adopting virtually all of Paul, Weiss’s arguments, Judge Caproni found that plaintiffs failed to allege with particularity that BNY Mellon had actual knowledge of the Ponzi scheme or provided substantial assistance to the scheme. Although plaintiffs alleged that BNY Mellon identified red flags concerning OneCoin-related fund transfers, the court held that plaintiffs failed to allege that BNY Mellon continued to facilitate fraudulent transactions after it investigated the flagged transfers and implemented measures to prevent further suspicious transactions. Importantly, the court also held that BNY Mellon’s alleged conduct—the provision of routine banking services to alleged fraudsters—does not, as a matter of law, constitute substantial assistance to the commission of a fraud, a holding that is important to BNY Mellon’s core business.

The Paul, Weiss team included litigation partners Michele Hirshman, Elizabeth Sacksteder and Audra Soloway.