- Key insight: Prosecutors say a bank employee used knowledge of customers from a previous job to facilitate the fraudulent loans.
- Forward look: A trial is currently scheduled for March 30, though the date is expected to be pushed back.
- What's at stake: The indictment charges Curtis Weston with bank fraud, conspiracy to commit bank fraud and money laundering.
Overview bullets generated by AI with editorial review
An Iowa man recently denied charges that he conspired with a bank employee to misappropriate nearly $22 million of the bank's funds in a fraudulent loan operation that vaguely resembled a Ponzi scheme.
Prosecutors allege that Curtis Weston and his co-conspirator used the fraudulent loan proceeds to play the stock market, eventually cycling money back to the bank to pay off earlier fraudulent debts.
However, their investment strategies seemingly failed, leaving $400 in their investment accounts and the defrauded bank with $20 million in losses.
Prosecutors did not detail the nature of the loans — whether they were, for example, mortgages or commercial credits — nor their terms. The 66 fraudulent loans, issued to 26 stolen identities and Weston himself, listed in the indictment range from as small as $100,000 to as large as $725,000.
Prosecutors did not name the banks defrauded in the scheme.
Weston pleaded not guilty on Jan. 26 to charges of bank fraud, conspiracy to commit bank fraud and money laundering, according to hearing minutes filed in the U.S. District Court for the Northern District of Iowa.
Weston's public defender did not immediately reply to a request for comment on the case.
The court ordered Weston released on a personal recognizance bond following his arraignment. The court scheduled the trial to begin on March 30, though this date will likely get pushed back.
For compliance officers and risk managers, the allegations detail a specific type of insider threat in which an employee leveraged knowledge of customers from his previous institution to facilitate fraud at his new employer.
The key to the scheme: A bank insider
The scheme allegedly relied heavily on the access and authority of Individual 1, the bank employee with whom Curtis allegedly operated the scheme.
Prosecutors describe the individual as an employee of Bank 1 who previously worked at Bank 2, both located in the Northern District of Iowa, neither explicitly named in court records.
The bank insider allegedly used his position to create and process fraudulent loans issued by Bank 1 totaling $22 million between September 2021 and November 2023. According to the indictment, he processed these loans in the names of Weston and 26 other customers.
Several of these victims were customers of the insider's former employer, Bank 2, and never had legitimate loan business with Bank 1.
Weston and the bank insider allegedly maintained investment accounts at an outside brokerage firm where they deposited the stolen funds. The accounts had dwindled to a total value of $379.18 by the end of 2023.
A straightforward digital trail
The indictment outlines a digital trail that relied on internal transfers. Bank 1 utilized an electronic wire system to transfer funds internally from its general ledger to customer accounts when the insider issued loans.
By approving fraudulent loans, the insider allegedly authorized transfers from the bank's general ledger directly into accounts Weston controlled at the bank.
From there, the pair moved the funds to their investment accounts at "Online Brokerage 1" or to other accounts Weston controlled.
To conceal the activity, the pair allegedly engaged in a cycle of churning loans. Toward the end of the scheme, Weston and the insider moved fraudulent loan proceeds through their investment accounts and then used those funds to pay down balances on older fraudulent loans, according to the indictment.
While the primary fraud targeted Bank 1, Weston and the insider allegedly utilized accounts at three other banks, as well, to layer the proceeds before depositing them into the brokerage account.
In one instance, Weston allegedly obtained a fraudulent $200,000 loan from Bank 2, allegedly by lying to the bank. He then transferred those funds to an account he held at Bank 3 via personal check.
Weston then wrote a personal check for $195,500 to the bank insider, who deposited that check into the insider's online brokerage account.
