Banks and banking – Limitations – Ponzi scheme

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Where a plaintiff has alleged that the defendant bank improperly enabled fraudulent transfers of securities owned by the plaintiff’s customers, the bank’s motion to dismiss should be allowed because the plaintiff’s claims are time-barred.

“Insight Securities, Inc. (‘Insight’) alleges that State Street Bank and Trust Co. (‘State Street’) improperly enabled fraudulent transfers of securities owned by Insight’s customers and sues State Street for aiding and abetting conversion, among other claims. State Street now moves to dismiss the First Amended Complaint (‘Complaint’ or ‘FAC’) under Mass. R. Civ. P. 12(b)(6) on statute of limitations and collateral estoppel grounds. For the following reasons, I must allow State Street’s motion. …

“Insight’s claims against State Street arise from allegations that, while serving as a sub-custodian for Deutsche Bank Trust Company Americas (‘DBTCA’), State Street improperly administered multiple fraudulent securities transfers in connection with a Ponzi scheme orchestrated by Biscayne Capital (‘Biscayne’) and its agent Fernando Haberer (‘Haberer’). …

“State Street now moves to dismiss the Complaint under Mass. R. Civ. P. 12(b)(6). It argues that Insight’s claims are time-barred and barred by the doctrine of collateral estoppel. …

“State Street argues that Insight’s claims have been filed beyond the applicable statute of limitations. … I agree. …

“… State Street argues that Insight’s cause of action accrued in March 2018, when the transfers at issue occurred. Insight contends that the accrual date was tolled under Massachusetts’ ‘discovery rule’ until July 25, 2022. …

“Here, I am not persuaded that the accrual date should be tolled because it is not clear to me that the alleged wrong underlying Insight’s cause of action was ever inherently unknowable. Through the exercise of reasonable diligence, Insight could have discovered the fraudulent transfers almost immediately and identified State Street as a possible defendant shortly thereafter. But, even if I were to apply the discovery rule, the accrual date would not be July 25, 2022, as Insight concludes. It would be September 4, 2018, at the latest. …

“… Insight was aware on September 4, 2018, that it had been harmed by a set of fraudulent transfers, which State Street administered. By that date, Insight knew it had been harmed or may have been harmed by State Street’s conduct. Even if the discovery rule tolled the running of the limitations period, it would only toll it until September 4, 2018 — nearly four and a half years before Insight filed its first complaint against State Street in the Northern District of Illinois, and nearly five years before Insight filed its first complaint against State Street in this court. Accordingly, the Complaint must be dismissed. …

“Even if the statutes of limitations did not bar Insight’s claims, State Street argues that Insight’s claims are also barred by collateral estoppel. I agree and briefly explain why. …

“Insight’s claims against State Street are barred by the doctrine of collateral estoppel because they are animated by an issue that was decided, or could have been decided, on the merits in a prior adjudication involving the same parties or their privies. …”

Insight Securities, Inc. v. State Street Bank and Trust Co. (Lawyers Weekly No. 09-102-25) (13 pages) (Krupp, J.) (Suffolk Superior Court) (Civil No. 23-1899-BLS1) (June 3, 2025).

Click here to read the full text of the opinion.