Crypto Scam Victim Sues Two Banks for $16.7 Million in Losses

Michael Zidell, who recently initiated legal action against Citibank for allegedly overlooking fraud warnings tied to a crypto romance scam, has now filed lawsuits against East West Bank and Cathay Bank. These new lawsuits claim that the institutions failed to block suspicious transactions that resulted in the loss of millions from his accounts.

Filed in a California federal court on Tuesday, Zidell’s latest lawsuits accuse the banks of “turning a blind eye to their statutory duties.” Zidell alleges he sent 18 transfers totaling nearly $7 million to scammers’ accounts at East West Bank, and 13 transfers worth over $9.7 million to Cathay Bank, following instructions from individuals he believed were helping him invest in non-fungible tokens (NFTs).

This legal action follows Zidell’s earlier lawsuit against Citibank on June 24, where he claimed the bank ignored red flags in 12 transactions worth around $4 million tied to the same fraud scheme. East West Bank and Cathay Bank have yet to comment publicly on the lawsuit.

Zidell’s complaints state he met “Carolyn Parker,” a supposed business owner, on Facebook in early 2023, and they quickly formed a romantic relationship. Within a month, Parker allegedly told Zidell she had made significant profits trading NFTs and encouraged him to do the same, directing him to a trading platform she claimed to trust.

Trusting her guidance, Zidell began transferring funds across multiple banks as instructed by the platform, believing it was necessary due to high deposit volumes. By April 2023, the platform’s website vanished, and Zidell’s investments—totaling over $20 million across all transfers—were gone.

Zidell’s lawsuits argue that East West Bank and Cathay Bank aided the fraud by providing accounts and wire transfer services without investigating suspicious transaction patterns, despite having a duty to monitor for fraudulent activity. The lawsuit highlights that the large, round-figure transfers should have triggered closer scrutiny by the banks.

Additionally, Zidell’s legal team is seeking to hold the banks liable for “aiding and abetting elder abuse” under California law, which applies to individuals aged 65 and older, although Zidell’s age is not disclosed in the filings.

Zidell seeks compensatory damages, legal costs, and interest, aiming for a jury trial as he pushes for accountability from banks amid rising crypto romance scam cases. The legal action against the banks highlights the growing concern over the role of financial institutions in preventing and mitigating the impact of crypto scams. Critics argue that banks have a responsibility to implement robust fraud detection and prevention measures, especially given the increasing sophistication of scammers and the anonymity offered by cryptocurrencies. The lawsuits against the banks could set a precedent for future cases, potentially leading to stricter regulations and oversight in the financial industry.

The case also underscores the need for greater awareness and education about the risks associated with cryptocurrency investments. Many victims of crypto scams are unaware of the potential dangers and are easily swayed by the promises of high returns and the allure of the digital currency market. By raising awareness and promoting best practices for safe investing, individuals can better protect themselves from falling victim to these deceptive schemes.

The outcome of Zidell's lawsuits against the banks remains uncertain, but the case serves as a stark reminder of the potential consequences of crypto scams and the importance of vigilance in the digital age. As the use of cryptocurrencies continues to grow, it is crucial for both individuals and financial institutions to remain vigilant and take proactive measures to prevent and address fraudulent activities.