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Berkshire Bank Sued For Customer’s Alleged $90M Ponzi

Law360 (May 14, 2024, 9:40 PM EDT) — Massachusetts-based Berkshire Bank is facing a proposed class action brought by an investor seeking to hold the bank liable for providing financial services to a bankrupt local business person whom the investor has accused of operating a $90 million Ponzi scheme.

In a complaint filed Monday in Syracuse, New York, federal court, plaintiff Mark S. O’Dell claimed that he’d lost “significant savings” to what he described as a Ponzi scheme allegedly operated by M. Burton “Burt” Marshall.

O’Dell claimed that over roughly the past decade, all the investments contributed to the alleged scheme were deposited into Marshall’s personal checking account at Berkshire Bank, and distributions to investors came out of the same account.

“During that approximately ten year period, Berkshire knew that Marshall’s deposits of funds acquired from investors in new notes was the primary source of credits to the Berkshire checking account,” O’Dell claimed, contending that the bank “substantially assisted” Marshall’s scheme by providing banking services.

The investor claimed that both Marshall and Berkshire Bank “handsomely profited” from the scheme, asserting that the bank knew about the scheme and failed to expose it.

Representatives for Berkshire Bank didn’t immediately respond to requests for comment Tuesday.

Allegations about Marshall’s scheme have attracted the attention of the U.S. Securities and Exchange Commission, which has gotten an extension of a deadline to file a certain complaint in the bankruptcy proceeding.

The office of New York’s State Attorney General also announced an investigation into Marshall’s affairs in March 2023. A spokesperson for the SEC declined to comment Tuesday and representatives for the NYAG did not immediately respond to a request for comment.

O’Dell described Marshall as operating a number of businesses in the Madison County area outside Syracuse including tax prep services, insurance brokering and real estate rentals. Marshall, who filed for Chapter 11 bankruptcy protection in 2023, is not a party to O’Dell’s suit.

But despite wearing so many hats, O’Dell alleged, Marshall’s “primary endeavor” was convincing those around him to invest in what he called the Marshall Fund via purchase of promissory notes offering an 8% annual return.

By using money from new investors to pay older investors, O’Dell claimed, Marshall “created and ran a fraudulent investment scheme paying prior investors mostly with newly invested funds — what is commonly referred to as a Ponzi or pyramid scheme.”

When Marshall filed for bankruptcy, O’Dell said, Marshall owed over $90 million worth of promissory notes to victims of his scheme.

O’Dell added that “it is apparent that the investor victims of the Marshall Fund will not receive full restitution” via the bankruptcy action, citing records from Marshall’s bankruptcy proceeding showing he has assets of just under $22 million and liabilities of nearly $93 million.

“Even after all efforts are made to return as much value as possible to investors, Marshall’s Ponzi scheme is likely to cost investors in the Notes more than $70 million or more,” O’Dell said.

On Tuesday, Peter Spett, an attorney for O’Dell, told Law360 via email that “Burt Marshall stole from our clients.”

“He thought he could get away scot-free by filing for bankruptcy, and he almost did. But Burt Marshall didn’t do this on his own. Over the past ten years or so, Berkshire Bank was there to help him every step of the way,” he said.

“Our clients may be down, but they’re not out, and they’re ready to fight to hold Berkshire Bank accountable for the devastating losses it caused to them. This filing today is the first step toward helping our clients get a full, and speedy, recovery,” he added.

O’Dell is represented by Scott L. Silver, Peter M. Spett and Ryan A. Schwamm of the Silver Law Group and Jason J. Kane, Daniel B. Centner and Grace A. Van Hancock of Peiffer Wolf Carr Kane Conway & Wise LLP.

Counsel information for Berkshire Bank wasn’t immediately available Tuesday.

The case is O’Dell v. Berkshire Bank, case number 5:24-cv-00652, in the U.S. District Court for the Northern District of New York.

Source: Law360 May 14 2024

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