Scandal and controversy seem to follow Wells Fargo (WFC) like a dark shadow that never leaves.
Seems like every year, there's a major problem involving the bank, that can make people think twice about doing business with the financial institution.
In December 2022, the U.S. Consumer Financial Protection Bureau ordered Wells Fargo to pay more than $2 billion in consumer redress, as well as a $1.7 billion civil penalty, for a series of actions including misapplied loan payments, improper home foreclosures, illegally repossessed vehicles and surprise overdraft fees.
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In October 2022, Sen. Elizabeth Warren (D-Mass.) published a report describing "rampant fraud and theft" through the digital payments network app Zelle, which operates through a partnership of Wells Fargo, Bank of America, JPMorgan Chase, Capital One, U.S. Bank, PNC Bank and Truist.
According to data provided by four banks using Zelle, $90 million in customer money was taken by scams and fraud claims in 2020, and losses were on pace to go over $255 million in 2022.
Warren's report focused on Wells Fargo as a bank where fraud involving Zelle was particularly prevalent, as the number of fraudulent transfers rose 2.5 times between 2019 and 2022. The senator further said that the bank "attempted to mislead" by capping the data it provided in 2021.
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Wells Fargo Pays Settlements
In September 2021, Wells Fargo agreed to pay $37 million to settle claims that it overcharged 771 commercial customers that used its foreign exchange services from 2010 through 2017, according to the U.S. Justice Department lawsuit and settlement filed in federal court in New York.
In February 2020, Wells Fargo said it would pay $3 billion to settle investigations by the Securities and Exchange Commission and the Justice Department into a fake-accounts scandal. The San Francisco-based bank admitted that employees opened checking and savings accounts customers didn’t want or ask for, and that it collected millions in fees as a result.
The settlement amount includes $500 million for "investors who were harmed by the conduct covered in the agreement," the bank said. As part of the agreement, no charges were filed. The company said separate settlements end civil investigations by the DOJ and SEC.
Ponzi Scheme Lawsuit is Wells Fargo's New Problem
The latest controversy involving Wells Fargo is a lawsuit filed on May 4 by a court-appointed receivership against the bank, accusing it of helping to facilitate a multimillion Ponzi scheme dating back to 2017 and allegedly run by Las Vegas attorney Matthew Beasley, which targeted over 1,000 victims. Beasley faces federal charges of wire fraud and money laundering in connection with the alleged scheme, the Las Vegas Review-Journal reported.
Prosecutors allege the scheme took more than $460 million from investors, but the lawsuit filed May 4 against Wells Fargo indicated that Beasley’s accounts may received about $500 million, the Review-Journal said.
Geoff Winkler, a receiver appointed by a federal judge to oversee the resolution of the Ponzi scheme's financial aspects, has taken over the assets and bank accounts related to the scheme and has secured more than $80 million in assets so far, according to the lawsuit.
Beasley allegedly operated the Ponzi scheme through an Interest on Lawyers Trust Account, which is meant for attorneys to hold onto client funds. The lawsuit said that “from a bank’s perspective, the fraudulent scheme was obvious. A Ponzi scheme of this magnitude cannot run surreptitiously through an IOLTA and various related-party accounts.”
