When Is a Bank Liable for a Customer's Ponzi Scheme?
By Matthew W. Reiser | Last reviewed September 30, 2026
A bank is liable for a customer's Ponzi scheme only in limited circumstances, usually when it actually knew of the fraud and substantially assisted it. Suspicious activity in the accounts, standing alone, is generally not enough.
The starting point: no duty to non-customers
California courts have long held that a bank owes no duty to people who are not its depositors to investigate or disclose suspicious activity in a customer's account. A California appellate court reaffirmed that rule in 2025 in a case involving an impostor posing as a licensed investment adviser. Harding v. Lifetime Fin., Inc., 109 Cal. App. 5th 753 (2025). Investors who were defrauded by a bank's customer therefore usually cannot sue the bank for negligence alone.
Aiding and abetting
The claim that does reach banks is aiding and abetting the fraud or the fraudster's breach of fiduciary duty. It requires proof that the bank actually knew of the specific wrongdoing and gave substantial assistance.
The leading California decision is Casey v. U.S. Bank National Ass'n, 127 Cal. App. 4th 1138 (2005). There, a bankruptcy trustee alleged that banks allowed fiduciaries to open accounts with invalid tax identification numbers, withdraw large sums of cash in violation of the banks' own policies, and pay obviously forged instruments. The court held that those allegations of irregular conduct did not establish that the banks actually knew of the fiduciaries' underlying breach, and the aiding and abetting claims failed. Red flags matter, but they must be tied to evidence of actual knowledge.
Florida courts apply a similar framework: an underlying fraud, the defendant's knowledge of it, and substantial assistance in its commission.
What actual-knowledge evidence looks like
Because banks rarely admit what they knew, these cases are usually built from the bank's own records once discovery is available:
- Internal anti-money-laundering alerts on the accounts and what the bank did about them
- Account-opening and know-your-customer files
- Communications between bankers and the scheme's operators
- Exceptions to the bank's policies made for the account, such as waived holds or unusual wire approvals
- Transaction patterns showing new investor money paying earlier investors, commingling, and round-trip transfers between related accounts
Who brings the claim
Individual investors can bring aiding and abetting claims. So can a court-appointed receiver for the entity that ran the scheme. Banks often argue that a receiver stands in the wrongdoer's shoes and cannot recover for its predecessor's fraud, and courts treat that defense differently depending on the jurisdiction and the facts. Investors and receivers sometimes pursue the same bank, so it is important to understand how the claims interact and how any recovery will be distributed.
Deadlines
Limitations periods generally run from when an investor discovered, or should have discovered, the facts giving rise to the claim. A regulator's complaint or a receiver's report can start that clock even before investors know the bank's role.
How we handle these claims
For claims against the people and firms that sold the investment, see our pages on investment fraud claims in Miami and in the Bay Area.
Reiser Law represents investors in claims against banks, auditors, valuation firms and other third parties around a failed investment. Read more about investor fraud and Ponzi scheme recovery, securities litigation for investors and our article on recovering losses after a Ponzi scheme, or contact our San Francisco Bay Area or Miami office.
This article is general information, not legal advice, and reading it does not create an attorney-client relationship. The law changes, and its application depends on the facts of each case. Attorney advertising. Past results do not guarantee a similar outcome.