Published on September 11th, 2024 | by Dr. Jerry Doby

AXS LAW Files $750 Million Securities Fraud Class Action Against Migom Bank and CEO Thomas Schaetti

AXS LAW expands its shareholder rights practice with a class action lawsuit against international crypto bank Migom Bank and CEO Thomas Schaetti, alleging securities fraud and asset diversion. The case, filed in the Southern District of New York, seeks $750 million in damages.

AXS LAW Targets Migom Bank in Major Securities Fraud Lawsuit; Class action alleges that CEO Thomas Schaetti siphoned customer deposits and misled investors

AXS LAW, a prominent shareholder rights firm, has expanded its practice by filing a securities fraud class action against Migom Global Corp., the parent company of Migom Bank, an international cryptocurrency institution. Filed in the Southern District of New York, the lawsuit accuses Migom Bank’s CEO, Thomas Schaetti, of diverting customer funds and deceiving investors with fraudulent financial statements. The plaintiffs are seeking $750 million in damages.

Read the full complaint here.

Allegations of Fraud and Asset Diversion

CEO Thomas Schaetti of Migom Bank accused of siphoning millions in customer deposits

The lawsuit alleges that Schaetti misappropriated millions of dollars in customer deposits by channeling them into other companies under his control. AXS LAW claims that Schaetti provided falsified financial statements to the U.S. Securities and Exchange Commission (SEC) and Migom Bank’s customers, painting a false picture of profitability and growth. These actions resulted in significant losses for investors who were misled by the fraudulent reports.

Criminal Proceedings in the Commonwealth of Dominica

Ministry of Finance investigates Migom Bank’s illicit activities

Compounding the legal trouble, Migom Bank is also facing criminal proceedings in the Commonwealth of Dominica, where the bank is licensed. The Ministry of Finance’s Financial Services Unit is conducting an investigation into the bank’s operations following the alleged asset diversion. Authorities have already moved to shut down Migom Bank’s activities, with Schaetti being removed from his role as director.

High-Profile Defendants

Disgraced Austrian politician Johann Gudenus named in the lawsuit

Among the defendants is Johann Gudenus, a former Austrian politician, who is accused of leveraging his political connections to aid Schaetti in concealing the asset diversion. The lawsuit paints a complex picture of intertwined political and financial corruption, with Gudenus allegedly providing protection and support to Schaetti in his fraudulent activities.

Expanding Shareholder Rights Practice

AXS LAW looks to bring more cases in the fintech and AI sectors

This class action marks a significant expansion of AXS LAW’s shareholder rights practice, which has traditionally focused on closely held corporations in Miami and Los Angeles. According to Jeff Gutchess, AXS LAW’s founding partner, the firm is gearing up for additional high-profile cases targeting public companies, particularly in the fintech and AI sectors. Gutchess highlighted that the current case represents the firm’s commitment to holding financial institutions accountable, especially in emerging industries like cryptocurrency.

$750 Million in Damages Sought

Investors claim significant financial losses

The plaintiffs, led by AMJ Global Entertainment, LLC, allege that they have suffered financial losses as a direct result of Migom Bank’s fraudulent activities. The lawsuit seeks $750 million in damages for the defrauded investors, many of whom were misled by false statements about the bank’s financial health and growth prospects. According to the complaint, Migom Global’s market capitalization once approached $1 billion, but the bank’s downfall has left investors with worthless shares.

Financial World Stands By

Migom Bank’s future remains uncertain amid legal battles

With both civil and criminal proceedings underway, Migom Bank’s future remains uncertain. The class action filed by AXS LAW aims to recover substantial damages for defrauded investors, while the criminal investigation in Dominica could lead to further legal action against the bank’s leadership. As the case progresses, it could set a precedent for how regulatory bodies and legal systems address fraud in the cryptocurrency banking sector.

Other Criminal Minds Who Have Caused Quite a Stir with Fraudulent Crypto-based Schemes in Recent Years

Here are some notable recent cryptocurrency-based fraud cases in recent years along with their legal outcomes

BitConnect (2016-2018)

Details: BitConnect was a high-profile Ponzi scheme that attracted billions of dollars from investors by promising unrealistically high returns through its lending platform. It operated using its own token, BCC. The platform shut down in 2018 amid regulatory scrutiny, with investors losing most of their funds.

Legal Outcome: In 2021, several individuals involved in the scheme, including promoters, were charged with fraud by the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ). The main figure behind BitConnect, Satish Kumbhani, was indicted on charges of conspiracy to commit wire fraud, price manipulation, and operating an unregistered securities offering. Some of the promoters have settled with the SEC, while cases against others are ongoing.

OneCoin (2014-2017)

Details: OneCoin was marketed as a cryptocurrency but turned out to be a massive Ponzi scheme that defrauded investors of over $4 billion. The project was led by Ruja Ignatova, who disappeared in 2017 and remains at large, with an international warrant out for her arrest.

Legal Outcome: Ruja Ignatova’s brother, Konstantin Ignatov, was arrested and pleaded guilty to wire fraud and money laundering charges. Other key figures were also charged, and Konstantin is cooperating with authorities. Several OneCoin affiliates have been convicted or are facing trial across multiple jurisdictions, including the U.S., Europe, and China.

PlusToken (2018-2019)

Details: PlusToken was a Chinese-based Ponzi scheme that defrauded investors out of nearly $3 billion. It promised high returns to investors in exchange for deposits in Bitcoin, Ethereum, and other cryptocurrencies.

Legal Outcome: In 2020, 109 individuals were arrested in China in connection with the PlusToken scam. The Chinese courts have convicted many of those involved, including key operators who received lengthy prison sentences. The case remains one of the largest cryptocurrency scams in history.

Centra Tech (2017)

Details: Centra Tech raised over $25 million in an initial coin offering (ICO), claiming to have developed cryptocurrency-related financial products. It gained notoriety after being promoted by celebrities like Floyd Mayweather and DJ Khaled. However, the company’s executives were charged with fraud for misleading investors with false claims about partnerships with major credit card companies.

Legal Outcome: In 2018, the SEC filed charges against the founders, Sohrab “Sam” Sharma and Robert Farkas, who later pleaded guilty to securities fraud. Farkas was sentenced to one year in prison in 2020, and Sharma was sentenced to eight years. The SEC also reached settlements with Mayweather and Khaled for failing to disclose payments they received for promoting the ICO.

MT. Gox (2014)

Details: Once the largest Bitcoin exchange, MT. Gox collapsed in 2014 after losing 850,000 BTC, worth over $450 million at the time, due to a hack. However, it was later revealed that much of the loss may have been due to mismanagement and internal fraud.

Legal Outcome: MT. Gox CEO Mark Karpelès was arrested in Japan and found guilty of falsifying financial records. In 2019, he received a suspended sentence, avoiding prison time. Ongoing bankruptcy proceedings are being used to reimburse creditors and customers who lost funds, though the process has been slow and incomplete.

QuadrigaCX (2019)

Details: The Canadian cryptocurrency exchange QuadrigaCX collapsed after the mysterious death of its CEO, Gerald Cotten, who allegedly took the private keys to $190 million in customer funds with him. Investigations revealed that the exchange had been operating as a Ponzi scheme.

Legal Outcome: Investigators have been unable to recover most of the funds. In 2020, a report by Ernst & Young, the court-appointed monitor, confirmed that Cotten had misappropriated user funds for personal use and to cover trading losses. Legal action continues, but the case remains unresolved with many investors still unpaid.

These cases highlight the significant risks associated with cryptocurrency investments, particularly in unregulated or poorly regulated environments. Legal outcomes often involve lengthy trials, arrests, and efforts to recover lost assets, though full restitution is rare in such high-profile fraud cases.

Migom Bank is the latest on the wire; stay alert and informed!

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About the Author

Dr. Jerry Doby Editor-in-Chief of The Hype Magazine, Media and SEO Consultant, Journalist, Ph.D. and retired combat vet. 2023 recipient of The President's Lifetime Achievement Award. Partner at THM Media Group. Member of the U.S. Department of Arts and Culture, the United States Press Agency and ForbesBLK.

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