Executives of the two Bahamian banking companies named in a US federal court lawsuit, involving approximately 2,000 plaintiffs who claim they were defrauded of $158 million, said yesterday they have not been contacted regarding the lawsuit.
Last week, the investors commenced legal action against Leadenhall Bank and Trust and Axxess International Ltd., the company contracted to process Leadenhall’s credit card business.
The claimants – predominantly from Atlanta, Florida, Illinois, Maryland and South Carolina – allege that they each invested between $5,000 and $22 million with Cash 4 Titles.
Atlanta-based company Cash 4 Titles reportedly ran a Ponzi scheme, which promised a tax-free return of up to 36 percent, using money obtained from existing investors to pay new investors.
According to the suit, Leadenhall and Axxess lent legitimacy to Cash 4 Titles’ operations and were ultimately “critical in sustaining and attracting necessary additional cash flow to ensure that the prior investors would continue to receive some return on the investment.”
Florida newspaper Sun Sentinel reported Monday that Cash 4 Titles operated 36 stores offering short-term, high-interest loans to borrowers who pledged their automobile titles as collateral.
The lawsuit, meanwhile, further stated that the company took in more money from investors than it needed to maintain operations and diverted the funds.
Additionally, the suit said Leadenhall and Axxess promoted Cash 4 Titles and their own services, while hosting investors on their trips to The Bahamas.
In 1999, securities investigators – determining that Cash 4 Titles was operating a Ponzi scheme – ordered the company to cease operations.
Ponzi schemes are a type of illegal pyramid scheme named for Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s.
In the scheme, money from new investors is used to pay off earlier investors until the whole scheme collapses.
On Tuesday Leadenhall Director William Jennings said he would not be able to comment on the suit as he had yet to be apprised about the action taken against his company.
Said Mr. Jennings, “We’ve had absolutely no contact whatsoever and nothing has come through to me at all.”
By Darrin Culmer, The Bahama Journal
