Articles Tagged with MedCapital Fraud

U.S. District Judge David Carter has turned down Wells Fargo & Co.’s (WFC) bid to throw out a securities lawsuit filed by investors accusing the investment bank of not fulfilling its role as trustee for debt issued by Medical Capital Holdings, which failed in an approximately billion dollar fraud in 2009. His ruling removes any obstacles to a possible trial. Claims could hit the hundreds of millions of dollars.

The investors in this securities case are among those that purchased notes put out by three Medical Capital special purpose companies that named the investment bank as their trustee. They are accusing Wells Fargo of 63 breaches. Meantime, the financial firm maintains that it didn’t act in bad faith and it wasn’t negligent in the way it fulfilled its contractual duties.

Per court documents, the holding company had raised $1.7 billion from over 20,000 investors between 2003 and July 2009, which was when the SEC filed a securities fraud lawsuit against it and two of its executives. The company soon shut its doors. Later, a receiver discovered that investors had lost $839 million to $1.08 billion in a Ponzi-like scam that involved the payment of extra fees.