“It was a third party scam,” said the attorney representing the claimants.
A divided panel of arbitrators under the aegis of FINRA Dispute Resolutions Services on Thursday awarded a client of Charles Schwab & Co. Inc. close to $1.34 million in compensatory damages over a dispute centered on wire transfers from an elderly client’s account to a cryptocurrency, Okcoin.
The clients, the Morthland family trust, sued Schwab in 2024, claiming negligence, breach of contract, violations of FINRA rules and breach of fiduciary duty, according to the FINRA arbitration award, which was dated Thursday.
Two arbitrators concurred on the decision while one dissented.
The causes of action relate to Okcoin cryptocurrency, according to the award. The arbitrators denied legal fees as part of the award.
“It was a third party scam,” said Scott Greco, attorney for the Morthland family. “Three wire transfers were made from the Schwab trust account, and we argued that Schwab failed to safeguard the assets of customer and act on signs of senior exploitation of the clients.”
“We empathize with the claimants, whose father was victimized by unscrupulous criminals,” a Schwab spokesperson wrote in an email. “But we disagree with the decision, which disregarded basic legal principles.”
Plaintiff’s attorney who represent clients suing brokerage firms using FINRA’s arbitration forum have recently commented about brokerage firms allegedly falling short in protecting clients’ assets from third part scams like those in this matter. The attorneys say firms are facing more client lawsuits in similar disputes, with brokerage firms committing serious mishaps in protecting client assets from outside scams.
Hector R. Diaz-Olmo, the dissenting arbitrator in the Morthland case, said he made his decision because the claim did not “comply with the intent of FINRA regulations,” according to the award.
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