The lawsuit, filed in Federal District Court in Brooklyn late Thursday, contends that Bank of America “established, equipped and staffed” a branch office in the headquarters of Mr. Cosmo’s firm, Agape Merchant Advance. As a result, the lawsuit contends that the bank knowingly “assisted, facilitated and furthered” Mr. Cosmo’s fraudulent scheme.
“Bank of America was at the epicenter of this scheme,” said the lawsuit, which seeks $400 million in damages from the bank and other defendants. “Without Bank of America’s participation, the scheme would not have succeeded and grown to such an enormous size.”
Mr. Cosmo surrendered to authorities at a Long Island train station in January in connection with a suspected Ponzi scheme involving what Mr. Cosmo called “private bridge loans” that promised investors returns of 48 percent to 80 percent a year. Many of his 1,500 investors were blue-collar workers and civil servants.
Bank of America declined to comment, saying that it had not yet seen the suit.
According to the suit, representatives of Bank of America worked directly out of Mr. Cosmo’s West Hempstead office, which was about 30 miles from the branch where Agape and Mr. Cosmo maintained their bank accounts. In addition, Bank of America provided on-site representatives at Agape with bank equipment and computer systems that allowed direct access to the bank’s accounts and systems, the suit said.
“Essentially, Bank of America established a fully functional bank branch manned by its own representatives within Agape’s offices, which is contrary to normal banking practices,” the lawsuit said. As a result, the bank’s representatives had “actual knowledge” that Mr. Cosmo was “diverting money to his own account” and “engaging in virtually no legitimate business whatsoever.”
In a complaint filed against Mr. Cosmo in January by the Commodities Futures Trading Commission, the government contends that from 2004 to 2008, Mr. Cosmo operated a fraudulent trading scheme in which investors were solicited to provide short-term bridge loans but that the money instead went into commodities trading contracts that lost money.
This is the second time that Mr. Cosmo has been accused of fraud. He had previously served 21 months in federal prison in Allenwood, Pa., for mail fraud. Upon his release in 2000, his broker’s license was revoked. He founded Agape after leaving prison.
The lawsuit also names a number of futures and commodities trading firms that, the lawsuit said, “assisted Cosmo in running an illegal unregistered commodities pool.” The suit says that the trading firms should “never have accepted this business,” which violated “know your customer” duties that are required of these firms.
One of the firms named in the suit was MF Global. Diana DeSocio, a spokeswoman for MF Global, said that when the firm became aware of Mr. Cosmo’s background last October, it closed Mr. Cosmo’s account and notified regulators.
Ms. DeSocio added that the account that Mr. Cosmo had was an individual account and was not an account set up on behalf of his investors.