Plotting a pump-and-dump stock scheme? Waiting to trade on that hush-hush tip you got from a friend? Looking to corner the market on pork bellies? Now might be your chance for any and all of those shenanigans. The thousands of people who keep U.S. financial markets running smoothly and fraud-free could be on unpaid leave starting tomorrow, along with the National Park rangers that corral unruly grizzly bears and the scientists tracking deadly pathogens at the Centers for Disease Control and Prevention. A few days ago, Bart Chilton, head of the U.S. Commodity Future Trading Commission, said the shutdown could have “disastrous impacts” for consumers. “You can bet the do-badders are licking their chops,” his statement read. More on Bloomberg BusinessWeek [...]

DALLAS — With the Dallas Mavericks’ season-opening game still a month away, the basketball team’s outspoken owner, Mark Cuban, will be seeing a different kind of court this week. The government’s insider-trading case against Cuban goes to trial Monday in federal court in Dallas. Cuban is expected to testify, and experts say the verdict could come down to whether jurors find the billionaire and regular on the ABC reality show “Shark Tank” to be likable or smug. Cuban is accused of using insider information to dump his stock in a small Internet-search company in 2004 just before the shares fell in value. He avoided $750,000 in losses. The Securities and Exchange Commission wants Cuban to give up the money and pay a civil penalty. More in the Huffington Post [...]

Even by the lamentable standards of U.S. banking and securities regulators, the settlements unveiled this week with Toronto-Dominion Bank (TD) for its role in a $1.2 billion Florida Ponzi scheme were incredibly lacking. Three federal agencies on Sept. 23 said they had struck deals with TD Bank, the Toronto-based lender’s U.S. unit. The penalties amounted to $52.5 million: $37.5 million to settle allegations by the Office of the Comptroller of the Currency and $15 million to the Securities and Exchange Commission. Per the usual niceties, TD Bank neither admitted nor denied the agencies’ claims, which ranged from negligence to violations of anti-money-laundering laws. It also settled with the Financial Crimes Enforcement Network, a unit of the Treasury Department, but that won’t result in additional payments. More on Bloomberg here.
[...]

Bank of America Corp’s Countrywide unit placed profits over quality in a “massive fraud” selling shoddy mortgages to Fannie Mae and Freddie Mac, a U.S. government lawyer said on Tuesday. The claim came at the start of the first case by the government to go to trial against a major bank over defective mortgage practices leading up to the 2008 financial crisis. Pierre Armand, a lawyer in the civil division of the U.S. Attorney’s Office in Manhattan, said Countrywide made $165 million selling loans that it promised were investment quality to Fannie and Freddie. More on Reuters [...]

JPMorgan Chase has agreed to pay about $800 million to a host of government agencies in Washington and London — and make a groundbreaking admission of wrongdoing — to settle allegations stemming from a multibillion-dollar trading loss, people briefed on the matter said. The settlements, expected this week, will help the nation’s biggest bank move beyond last year’s $6 billion blunder and mend frayed relationships with regulators. Senior JPMorgan executives also avoided charges in the case, another victory for the bank, despite initial questions about whether they misled investors about the risk of the trades. Even so, it seems unlikely that the bank will be able to close the chapter on the case known as the London Whale just yet. More in the New York Times [...]

Will top bankers’ behaviour ever land them in jail? Or are bad business decisions even a crime at all? Five years on from the bankruptcy of Lehman Brothers, the debate over how to hold senior bank bosses to account for failures is far from over, but legal sanctions for top executives remain a largely remote threat. Even as laws evolve – in Britain, the government wants to criminalise recklessness in banking – a repeat of the global financial crisis and near-collapses of 2008 would not necessarily result in many more prosecutions today, lawyers say. Read more on The Huffington Post [...]

Five years after the fourth-largest U.S. investment bank collapsed, sparking a panic that many believed would bring down the world financial system, many of the executives who tried to paper over the bank’s mounting losses are reaping the benefits of the Wall Street comeback. The Huffington Post charted the career paths of 63 former Lehman Brothers employees named in an independent bankruptcy examiner’s report as having knowledge of an accounting maneuver that allowed Lehman to disguise the true extent of its deteriorating finances, likely postponing the reckoning. A stunning 47 of these bankers still hold senior positions in the financial services industry, including Michael McGarvey, an executive and senior member of Lehman’s finance group who described the accounting move in internal emails as “basically window-dressing” based on “legal technicalities.” Within Lehman, the this group was responsible for most aggressively pushing the dodgy accounting move, known as Repo 105, according to emails published with the 2,200-page examiner’s report. More in the Huffington Post [...]

Five years ago, Sunday night was a time of action for the financial world. Top officials desperate to band-aid an oncoming meltdown would use the weekend to find a suitor for distressed firms before the markets opened on Monday. Bear Stearns got sold to JPMorgan Chase on a Sunday night. Washington Mutual and Wachovia and Merrill Lynch sold on a Sunday too. Mortgage giants Fannie Mae and Freddie Mac went into conservatorship over the weekend. But there was no weekend shotgun wedding for Lehman Brothers, and their ensuing collapse triggered the final stage of a crisis that we’re still feeling today, when you look at 7.3 percent unemployment, the lowest labor force participation rate since 1978, 49 million on food stamps and 1 in 6 mortgage holders owing more on their house than it’s worth. The government spent trillions to bail out Wall Street, but ordinary Americans received only token support. And in this man-made disaster, virtually everyone responsible has gotten away unharmed. In fact, the system that created the financial collapse has been restored more than reformed, and the conditions still exist for another disaster. More on Salon [...]

The financial crisis brought with it the exposure and collapse of hundreds of Ponzi schemes,1 many of them headline news over the past five years. Scrambling to recover their lost investments, defrauded investors have turned to the courts. And with the shell companies run by the Ponzi scheme perpetrators typically bankrupt, victim-investors have pointed the finger elsewhere: at the banks where the perpetrators held accounts. The logic goes (according to these investors) that whatever tort the Ponzi schemer committed, the bank was liable for aiding and abetting by way of the banking services that it provided. Plaintiffs have also attempted to hold banks liable on other tort-based theories such as negligence, conspiracy, and conversion. Despite the influx of lawsuits against banks, courts have consistently dismissed the suits for sound legal and policy reasons, and three main themes have emerged. First, banks do not owe a duty to non-customers. Thus, negligence and breach of fiduciary duty claims against banks have failed for want of any duty owed to the investor/non-customer. Second, “red flags”—suspicious, atypical banking activity—do not constitute “actual knowledge,” an element that must be proven for an aiding and abetting claim. Third, providing routine banking services for a client is not enough to constitute “substantial assistance,” another element that must be proven for an aiding and abetting claim. More on Bloomberg Law [...]