Charles Schwab may have a big elder fraud problem on his hands.
For the third time in less than two months, Schwab and its affiliates have been accused of doing nothing to prevent scammers from draining their clients’ retirement savings accounts. The latest case, filed Wednesday in federal district court in Northern California, accuses Schwab of standing idly by while bad actors directed an elderly Los Angeles County couple to take nearly $30 million from their account and transfer much of it to a cryptocurrency exchange through the Bank. from America.
Ultimately, the $18.5 million was converted into crypto and sent to the scammers, making it unrecoverable, according to the suit.
In all three cases, the alleged fraud was committed on the same basis.
Fraudsters hack into potential victims’ computers and take over their financial accounts. They then become law enforcement or representatives of financial companies that want to transfer assets to other places, for purposes that can be seen. But in fact, he only brought money in his own hands.
That’s just what Lawrence Liu, 84, and his wife, Ling-Ling Liu, 76, allege. in that setting filed Wednesday against Charles Schwab, Bank of America and crypto exchange Unchained Trading. Liu’s suit asks the same question in other recent cases of alleged elder abuse: Why are trusted financial institutions that ignore obvious warning signs and do not intervene quickly?
“This case arises from the calculated abuse and harm of vulnerable elders, which the financial institution did the necessary – but failed in this case – to prevent the type of anomalous and suspicious fraudulent activity that was opened to the plaintiffs,” according to the lawsuit. .
A spokesman for Schwab said, “We sympathize with the Liu family, and we hope the criminals who stole the money are brought to justice. But the allegations in the complaint crossed the line of defense to outright falsity.”
The spokesperson added, “The Liu family authorized every wire that left Schwab, and every wire went to an account controlled by the Liu family.”
Liu’s lawsuit is just the latest case to draw attention to an older epidemic of fraud, which is sometimes referred to as the “crime of the 21st century.” AARP has estimated that people 60 and older lose more than $28 billion a year for scammers, many go unreported because victims are too embarrassed to admit they are victims of fraud.
Hugh BerksonThe principal attorney at the Cleveland-based McCarthy Lebit Crystal & Liffman and former president of the Public Investor Advocate Bar Association, said the company has clearly fallen behind in the ability to protect client assets from sophisticated fraudsters.
“As the baby boomer generation gets older, and more retire, there will be more opportunities for fraud in this area,” Berkson said. “And the tools scammers use continue to improve with frightening consequences.”
One of Liu’s lawyers, David Silver, of the Coral Springs, Florida-based firm Silver Miller, said he did not think new laws were needed to prevent the fraud he and his associates committed against Schwab, Bank of America and Unchained Trading is allowed to happen. He said most fraud “would stop if financial institutions and exchanges met their obligations as gatekeepers to senior citizens’ accounts and assets.”
“Financial institutions and exchanges should only fulfill their existing responsibilities under existing laws to protect their clients,” Silver added. “Anything less is damaging and a breach of duty with the trusted financial guards sleeping at the gates.”
Silver refused to provide biographical details about Lius, saying they were “very personal.” Here, according to the filing, is how the elderly couple was defrauded of millions.
Lius became a Charles Schwab client this spring after the account he previously held at TD Ameritrade was transferred afterward merger of two companies in September 2023. In July of this year, Lawrence Liu saw a pop-up warning appear on his computer telling him his Schwab account was under attack.
Liu was given a phone number supposedly for a Schwab employee who could help him protect his assets. The fraudster advised Liu to transfer his and his wife’s assets to another institution for safekeeping.
The fake Schwab employee was able to gain Liu’s trust by showing intimate familiarity with Liu’s account holdings — the kind of knowledge only an insider could have. The withdrawal of funds from Lius’ Schwab account to Bank of America began on July 9 with a transfer of $50,000.
This was followed the next day by the sale of shares of stock held by Lius in a Schwab account for approximately $22 million. Meanwhile, a scammer posing as a Schwab employee has persuaded Lius to open an account at Austin, Texas-based Unchained Exchange Training.
On July 11, Lius sold nearly $1 million in additional stock and set up a connection linking his Bank of America account to Unchained Trading and another Schwab account to Bank of America. Over the next few days and weeks, Lius would use those channels and similar ones with Wells Fargo and JPMorgan Chase to move millions of dollars out of Schwab accounts.
From the money made to Unchained Trading, most of it is used to buy cryptocurrency. The digital assets are then sent to an online address believed to be managed by a scammer posing as a Schwab employee.
Importantly, Wells Fargo and JPMorgan ultimately refused to transfer Lius’ assets to Unchained Trading, due to suspicions of wire fraud.
Charles Schwab and Bank of America, though, continue to heed his request, although nothing in the history of the pair suggested interest in cryptocurrency.
“Wire transfers from Plaintiff’s BofA account – from which no prior wire transfers were sent – have increased from $700,000.00 to $2,000,000.00 to $3,500,000.00 to $5,000,000.00,” according to the suit. “BofA had clear and actual knowledge of the increased number of wire transfers sent from Plaintiff’s BofA account over a short period of time, yet BofA continued to authorize it.”
A Bank of America spokeswoman declined to comment for this story. Unchained Trading did not respond to a request for comment.
During the transfer, Lius received several letters from Schwab and the IRS. Some of them warned that their Social Security numbers had been stolen and advised them to protect their assets by moving them to Unchained Trading. One of the letters also told Lawrence Liu that the conversion of assets into cryptocurrency in Unchained Trading is only temporary and that the money will be returned.
Unchained Trading continued to allow Lius to buy cryptocurrency until September 16, when it suddenly refused to process a $3.5 million purchase request. Unchained even sent an email to Lius telling him that his account was closed and any unused money would be refunded.
All told, Lius and his attorneys estimate that Schwab authorized the transfer of $29.55 million from an account held for Lius. Of that money, about $22 million was transferred through Bank of America to Unchained Trading.
People familiar with the case said Schwab reached out to police after the scam. Law enforcement officers visited Lawrence Liu only to be told that his assets had been transferred for “investment purposes.”
Liu’s suit accuses Schwab, Bank of America and Unchained Trading of violating California’s Elder Abuse and Dependent Adult Civil Protection Act and unfair competition laws, and accuses the defendants of gross negligence. It also accused Unchained Trading of specifically violating various provisions of the Federal Electronic Fund Transfer Act.
