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, Bloomberg Law reported. Instead, the account resembled that of one of the fastest growing law firms in the U.S. 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. He now faces criminal charges, and the 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 that the bank aided the scheme. The case raises several 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 was an “interest on lawyer trust accounts” (IOLTA). Lawyers use IOLTAs to hold client funds for court fees and other payments, including drawing down retainers. Account interest goes to legal aid programs. State bar authorities somewhat oversee the accounts, performing occasional, random audits. Banks must notify the bars when lawyers do overdrafts. Wells Fargo missed red flag after red flag in Beasley’s IOLTA account, his investors allege. These included the mismatch between what he said the account would generate and how much it collected.
