Welcome back to the Big Law Business column on the changing legal marketplace written by me, Roy Strom. Today, we look at a bank’s response to curious account activity from one of Nevada’s fastest-growing law firms, which was really a Ponzi scheme. Sign up to receive this column in your inbox on Thursday mornings.
Matthew Beasley told Wells Fargo & Co. his solo law practice would collect about $350,000 a year when he set up a firm trust account at a branch in Las Vegas in 2017.
Instead, the account resembled that of one of the fastest growing law firms in the US. It took in $30 million in February alone, and deposits more than doubled in 2020 and 2021 after tripling in 2019.
Beasley wasn’t running a successful law firm—he was operating a nearly $500 million Ponzi Scheme, according to federal prosecutors. He faces criminal charges and the US Securities and Exchange Commission has named him in a civil complaint.
Now Wells Fargo is in the crosshairs of Beasley’s investors. The group filed a class-action complaint this month alleging the bank aided the scheme.
The case raises questions: What responsibilities do banks have to oversee law firm trust accounts? How much do they need to know to be held liable for fraudulent activity?
The type of account Beasley used is called an IOLTA, which stands for “interest on lawyer trust accounts.”
Lawyers use IOLTAs to hold client funds for court fees and other payments, including drawing down retainers. Account interest goes to…
