Two American citizens have sued Monex after its representative allegedly stole US $40 million from clients.
A Mexican financial services company has attempted to resolve a multi-million-dollar fraud involving expatriates and others in San Miguel de Allende with an offer to reimburse them with 60 cents on the dollar.
But two brothers from the United States have chosen legal action instead.
Jim and Ken Karger are among investors from several countries who charge that their savings were stolen from their Grupo Financiero Monex accounts in Mexico. More than 50 retirees in San Miguel discovered early last year that their accounts had been emptied.
An investigation by Mexico News Daily published last June found that an estimated US $40 million from more than 150 Monex accounts belonging to United States, Canadian, British, European and Australian expatriates was stolen via an alleged decade-long Ponzi scheme.
The banker who allegedly defrauded the Karger brothers and other victims, was Marcela Zavala Taylor, an English-speaking woman who provided personal banking services to Monex clients. However, after the millions went missing, she stopped all correspondence with her customers.
Monex has denied any responsibility for the fraud, filing a criminal complaint against Zavala and declaring that she acted alone.
Some defrauded customers who settled with the bank, often for amounts much less than their losses, were asked to sign an agreement that blamed Zavala alone for missing funds.
Meanwhile, Monex has continued to argue with other defrauded customers about how much money they should get back, Bloomberg said in a report published on Thursday.
Several victims said they didn’t consider legal action because they believed that any settlement they won would likely be eaten up by lawyers’ fees.
The Kargers, on the other hand, “won’t back down,” Bloomberg reported.
The news agency reported that the brothers, who have a private lending business in San Miguel de Allende, turned down an offer for about 60% of their principal in US dollars, choosing instead to launch legal action.
Jim Karger told Bloomberg that they had cash in a Monex bank account and shares in Apple Inc. and Tesla Inc. in a brokerage account, which was allegedly drained. When the brothers began speaking to Monex about their missing money a year ago, they were told that their account had been in pesos although Zavala had told them that it was in dollars.
As the peso has lost value in recent years, the amount they would get back from the bank if they opted for settlement would be much lower than their initial investment. Instead, Jim and Ken Karger are suing for their principal investment in US dollars, Bloomberg said.
“Most people settled for less than principal because they can’t afford to do what we’re doing,” Ken Karger said. “It may be a long shot, but what we’re doing will punish the bank, which will force them to the table.”
The brothers have also set up a website – bancomonexfraud.com – that is designed to draw attention to their case and help other people who have lost their savings. It features news stories and other information about the fraud allegations against Monex as well as an open letter to chief financial officers responsible for funds in Mexico.
According to Bloomberg, Jim and Ken Karger want their cash but also want to make a point that the Mexican banking system should take responsibility for the actions of employees.
To date, the brothers have spent US $150,000 trying to get back about $1.5 million that they say they lost.
“This is a cause, and it’s bigger than Jim and me,” said Ken Karger, a retired dentist who lives in Fort Worth, Texas.
Legal actions filed by him and Jim Karger, who had a labor law firm in Dallas before moving to San Miguel 18 years ago, are aimed at having federal financial crimes prosecutors take up their case. The brothers want them to investigate Monex, its employees and Zavala, their one-time personal banker.
They hope that a two-year-old law that says that financial companies can be held accountable for the actions of their employees and agents will help their cause.
“Monex is trying to let everyone believe that Marcela was the only one involved,” Antonio Holguin, an attorney representing the Kargers, told Bloomberg.
“We think she was not the only one responsible. She was using tools of the bank, so the bank as an entity should face criminal charges.”
However, proving that Monex is responsible could take a very long time, according to Kevin Carr, founder of financial technology company Finiden in Washington, D.C. and a former primary representative of the United States Treasury Department Mexico.
He told Bloomberg that cases can take years and that courts often attempt to push opposing parties towards settlement. That makes legal action risky, Carr said.
Monex spokesman Fernando García told Bloomberg via email that the bank has been cooperating with investors and has settled with all but three clients who claimed to have been defrauded.
“It is up to the judicial system to determine those responsible,” García wrote. “Monex Financial Group reiterates that it is an institution that acts with strict adherence to national and international standards.”
Bloomberg said that its attempts to contact Zavala and her lawyer were unsuccessful.