Court filing
Second Amended Complaint — Harborview Capital Partners v. Cross River Bank, No. 2:21-cv-15146 (D.N.J. Oct. 30, 2025) (D.N.J. No. 2:21-cv-15146)
Filed October 30, 2025 in Harborview v. Cross River; one of 10 filings from this case.
Record facts
| Court | U.S. District Court, District of New Jersey |
|---|---|
| Filed | 2025-10-30 |
U.S. District Court, District of New Jersey · No. 2:21-cv-15146-EP-SDA · Doc. 135 · 2025-10-30 · Docket on CourtListener
Full text
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4914-8853-2853
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HARBORVIEW CAPITAL PARTNERS,
LLC,
Plaintiff,
vs.
CROSS RIVER BANK,
Defendant.
Docket No. 2:21-cv-15146-EP-SDA
PLAINTIFF HARBORVIEW CAPITAL PARTNERS' SECOND
AMENDED COMPLAINT
CHIESA SHAHINIAN & GIANTOMASI PC
A. Ross Pearlson, Esq.
Brigitte M. Gladis, Esq.
105 Eisenhower Parkway
Roseland, NJ 07068
Telephone: 973.325.1500
Facsimile: 973.325.1501
FRANKEL, RUBIN, KLEIN, PAYNE
& PUDLOWSKI, P.C.
Mayer S. Klein, Esq. (admitted pro hac vice)
231 S. Bemiston Avenue, Suite 1111
Clayton, MO 63105
Telephone: 314.725.8000
Facsimile: 314.726.5837
Attorneys for Plaintiff
Harborview Capital Partners, LLC
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Plaintiff, Harborview Capital Partners, LLC (“Plaintiff” or “Harborview”), by and through
its undersigned counsel, for its Second Amended Complaint against Defendant Cross River Bank
(“Defendant”, “Cross River” or “Bank”), alleges as follows:
PARTIES
1.
Plaintiff Harborview is a Delaware limited liability company authorized and
existing under the laws of Delaware.
2.
Defendant Cross River is a New Jersey banking corporation with its
principal place of business in Teaneck, New Jersey.
JURISDICTION AND VENUE
3.
Plaintiff is a Delaware limited liability company, and Defendant is a New Jersey
entity. For this reason, there is diversity of citizenship between the parties.
4.
The amount in controversy exceeds $75,000.
5.
Venue is proper in this Court since Defendant is a resident of the State of New
Jersey, and Plaintiff’s cause of action arose in New Jersey.
FACTS
6.
Cross River was established in 2008, with Mr. Gilles Gade (Gade) as President.
Cross River’s primary place of business is 885 Teaneck Road, Teaneck, New Jersey 07666.
7.
Mr. Ephraim Kutner (Kutner) is President of Harborview.
8.
Gade and Kutner had a longstanding social relationship. They were friends for
many years, and had worked together on various charities.
9.
Kutner formed Harborview with his brother, Jonathan Kutner (collectively “the
Kutners”). Harborview is a commercial real estate finance, equity, and advisory firm which
provides services for all commercial real estate asset classes.
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10.
Harborview’s business includes high-dollar transactions. The business is located
in the United States, and its work is limited to the United States. Harborview has never conducted
any business outside the United States.
11.
In 2013, Gade and Kutner discussed Harborview, specifically whether Harborview
would set up accounts for its significant business in Cross River Bank.
12.
At all relevant times herein, Gade was keenly knowledgeable as to Harborview’s
business, basically what the business was about and how it operated, that the business operated
only in the United States, that Kutner traveled extensively in furtherance of the business, and the
particular needs for security that a business like Harborview required.
13.
In various communications, Gade communicated both with Kutner and internally
with Cross River personnel about Harborview setting up its accounts at Cross River, and was
involved in getting the accounts established at the Bank.
14.
Upon information and belief, Gade knew that securing Harborview’s business
would significantly improve Cross River’s financial status by growing its modest base of
assets/deposits, and would effectively advance the Bank’s reputation as a reputable financial
institution. The addition of Harborview’s business would benefit Cross River in multiple ways.
15.
In response to Cross River’s efforts to secure Harborview’s business and the deposit
of its significant funds, Harborview expressed and communicated its primary concern with
depositing such significant assets in a financial institution like Cross River. Harborview clearly
communicated its concerns and questions as to whether the Bank had the resources and ability to
handle and securely protect Harborview’s funds. For Harborview, that concern also included
questions as to whether the Bank had the personnel, policies, and procedures which would protect
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Harborview’s assets and which were readily available in other and larger financial institutions
where Harborview could take its money.
16.
In order to convince Harborview to set up its accounts at Cross River, Gade assured
and promised Kutner personally on behalf of Cross River and on multiple occasions that
Harborview’s money would be safe. Gade also discussed several other ways that he, Cross River,
and Harborview could work together.
17.
Gade also assured and promised Kutner that Cross River’s top people would always
be readily accessible to handle Harborview’s needs.
18.
Harborview relied on Gade’s promises and representations, made on behalf of
Cross River, that Cross River would keep Harborview’s money safe.
19.
Cross River expected and intended that Harborview would rely on these promises
and representations, and Harborview reasonably relied on same.
20.
At all relevant times herein, communications between Harborview and Cross River
were conducted primarily, particularly on any issues of concern, between Gade and Kutner or other
top management personnel in the two organizations.
21.
Gade would routinely communicate with Kutner to inquire as to whether
Harborview was satisfied with the Bank’s services, whether Harborview was happy with the
Bank’s services, and whether Harborview had any other needs.
22.
Harborview understood Gade’s inquiries and discussions as indicating that Gade
was directly involved with ensuring that Harborview’s accounts were being protected as promised.
23.
Based on Gade’s representations, Kutner understood and believed that Cross River
would be utilizing all means necessary to protect Harborview’s money, and that the Harborview
accounts would be watched over by Gade or other top management personnel of the Bank.
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24.
Harborview would not have deposited funds in Cross River if not for the
representations and promises made by Gade on behalf of Cross River.
25.
In reliance on Kutner’s relationship and discussions with Gade, on Gade’s
knowledge of Harborview’s business, and on Gade’s representations that Cross River would take
the steps necessary to protect Harborview’s assets, Harborview began depositing funds at Cross
River. Such deposits ultimately totaled the sum of $20,000,000.00, within various accounts at
Cross River.
26.
Upon information and belief, Gade was personally involved in and supervised the
set up of the Harborview accounts.
27.
For example, Gade negotiated the details of the interest rate which would be
applied to certain accounts.
28.
In addition, Gade personally offered Harborview additional incentives such as
offering not to ever charge Harborview for being overdrawn on a savings account if the company
kept certain balances in other accounts.
Opening Accounts
29.
In order to initiate the opening of accounts for Harborview, Cross River required
that Harborview complete certain forms.
30.
Upon information and belief, Tina Rubino, a branch manager for Cross River, was
the person assigned to handle the mechanics of setting up the accounts.
31.
Upon information and belief, Gade was supervising and in contact with Ms. Rubino
during this process.
32.
Ms. Rubino consulted Gade directly with Harborview questions, and responded to
Harborview with Gade’s directions regarding how the accounts would be set up.
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33.
In or about January 2018, Ms. Rubino provided Harborview with a business
account data form.
34.
On information and belief, completion of the business account data form utilized
by Cross River is required by and is in accordance with the applicable banking regulations and
commensurate with the industry standard for obtaining the information required to protect each
customer’s funds.
35.
Ms. Rubino indicated that the business account data form would have to be filled
out in order to open the account and prepare signature cards.
36.
Upon information and belief and based on her email communications, Ms. Rubino
carefully scrutinized the completed account data form, and identified what additional information
was required to connect the account to online banking. This is standard procedure under the bank’s
Know Your Customer Policy, as it using these forms to give every client a “risk rating” based on
the business conducted of the customer.
37.
In January 2018, Harborview, as it had done many times prior, completed and
returned the business account data form required by Cross River. See Exhibit A: Account
Opening Data Entry Form/New Business Account Information (account data form).
38.
The account data form provided the following required information:
a.
Anticipated Wire Activity:
Domestic
6
Foreign
0
b.
Monthly $ Volume Domestic:
$6,8000,000.00
Monthly $ Volume Foreign:
0
b.
Trade Area:
USA
c.
Is Business Conducted of Foreign Nature:
No
39.
On the same account data form, Harborview designated the following Authorized
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signers:
a.
Ephraim Kutner
Position with the Company: President and CEO
Owner of Account:
Yes
b.
Jonathan Kutner
Position with the Company: Managing Director and Principal
Owner of Account:
No
c.
Marilyn Tirado/Bara Dolinger/Gershon Yarmush
Position with the Company: Administrative Staff
Owner of Account:
No
40.
In addition to the communications between Kutner and Gade and the
communications with Ms. Rubino, Harborview completed all account data forms with the same
information; i.e. Harborview’s Trade Area was “USA”; its Anticipated Wire Activity was
“Domestic”; and the business it conducted was not of a foreign nature. See e.g., Exhibit B. Ms.
Rubino denoted the risk rating as “High” based on her review of the anticipated activity.
41.
Harborview consistently and repeatedly advised Cross River that it did not conduct
foreign business and did not make foreign wire transfers. In addition, as the result of a “high” risk
rating, Cross River’s Know Your Customer (KYC) policy required Cross River to “identify and
understand the general operating” environment and the “relationship with a particular customer
within their target market.” See KYC Policy, Exhibit C, p.13.
42.
Cross River’s owner, Gade, who promised Kutner that Cross River would keep
Harborview’s money safe, knew that Harborview did not conduct foreign business and did not
make foreign wire transfers.
43.
Harborview employed all means known to it to convey to and ensure that Cross
River knew that Harborview did not make foreign wire transfers, none of its Authorized Signers
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was permitted to authorize foreign wire transfers, and Cross River had or would put in place the
necessary procedures to ensure that foreign wire transfers were not processed from any
Harborview account. Harborview’s Authorized Signers were given no authority to change the
business practices of Harborview as told to Cross River.
44.
Upon information and belief, if Harborview had indicated that it would be
conducting foreign wire transfers, additional information and steps would have been required to
allow Harborview to process foreign wire transfers. Since Harborview clearly indicated that it
would not be employing foreign wire transfers, Cross River did not provide any information or
otherwise discuss foreign wire transfers with Harborview.
45.
Harborview understood that one of the purposes of the account data form was to
provide the information Cross River required to protect the funds in Harborview’s accounts.
46.
Harborview understood that the account data form was the method set up by Cross
River for Harborview to communicate to the Bank how its account was to be handled, and it was
Harborview’s expectation that Cross River would allow only domestic wire transfers as
Harborview clearly instructed on the account data form.
47.
Upon information and belief, one of the purposes, if not the primary purpose, of
requiring that the customer identify whether it conducts domestic and/or foreign wire activity and
whether it conducts foreign business is to identify what type of transfers the named signatories
were designated to authorize.
48.
Upon information and belief, if Cross River had no policies and procedures in place
by which it would scrutinize wire transfers, but Cross River would instead allow any signatory to
authorize any type of transfer without reference to the customer’s directions, then there would be
no need to require that the customer identify the types of transfers its signatories were allowed to
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authorize.
49.
Upon information and belief, the information elicited on the account data form was
input in Cross River’s system and utilized in order for Cross River to institute or apply policies
and procedures which would ensure that wire authorizations were limited to either Domestic or
Foreign as indicated by the customer, and so that Cross River could take the steps necessary to
(1) limit the persons who could authorize a transfer to only those individuals identified on the
account data form, and (2) limit transfers to the type of transfer identified on the account data form.
50.
Harborview reasonably relied on Cross River to review and utilize the instructions
and information provided in the account data forms in order to protect Harborview’s monies as
promised.
51.
Cross River expected and intended that Harborview would rely on Cross River’s
proper use of the information provided on the account data entry forms to enact or apply policies
and procedures to protect Harborview’s monies, and Harborview reasonably relied on same.
52.
Cross River failed either to correctly document the information Harborview
provided on the account data form, and/or Cross River negligently failed to institute and/or apply
procedures which would have prevented the processing of a foreign wire transfer in direct
contravention of the information Harborview provided at Cross River’s direction.
53.
The documents completed as required by Cross River indicate that the Authorized
Signers were authorized for domestic wire transfers only.
FRAUDULENT TRANSFERS
54.
At some point prior to August 16, 2018, unbeknownst to Harborview, the CEO of
Harborview’s e-mail account was hacked.
55.
The hacker added a rule to auto-delete all mail to the CEO’s email inbox, which
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allowed the hacker to send and receive emails from the CEO’s account without the CEO’s
knowledge.
56.
From August 16, 2018 through August 27, 2018, the hacker used the CEO’s email
account to direct an administrative staff person to wire funds internationally.
57.
This hacking scheme was well known in the banking industry as “CEO Fraud” or
“Business Email Compromise.”1
58.
By 2018 when the fraudulent Wire Transfers were processed by Cross River, this
type of wire fraud was well-known in financial circles as the “Business Executive Scam” or the
“CEO Fraud.”2 The FBI described the scam as follows:
The e-mail accounts of high-level business executives (CFO, CTO, etc) are
compromised. The account may be spoofed or hacked. A request for a wire transfer
from the compromised account is made to a second employee within the company
who is normally responsible for processing these requests.
59.
As early as 2015, the FBI reported that “the majority of the [fraudulent] transfers”
in CEO Fraud and other Business Email Compromise cases, were “going to Asian banks located
within China and Hong Kong.”3
60.
On July 12, 2018, the FBI reported that the real estate industry was a particular
target of Business Email Compromise schemes.4
61.
Despite the industry knowledge of the way CEO Fraud schemes work, and the
particular vulnerability of companies in the real estate sector, Cross River failed to set up
1 See further information infra at 57 et. seq.
2 See, Federal Bureau of Investigations Internet Crime Complaint Center. (2016). Business email compromise: The
3.1 billion dollar scam. Retrieved from: http://www.ic3.gov/media/2016/160614.aspx. See also, Ensign, Rachel
Louise. (23 Feb 2020). Losing $450,000 in Three Days: Hackers Trick Victims into Big Wire Transfers; Wall Street
Journal (Online); New York, N.Y.
3 See, Federal Bureau of Investigations Internet Crime Complaint Center. (2015). Business email compromise public
service announcement. Retrieved from: https://www.ic3.gov/media/2015/150827-1.aspx.
4 See, Federal Bureau of Investigations Internet Crime Complaint Center. (2018). Business E-Mail Compromise The
12 Billion Dollar Scam. Retrieved from https://www.ic3.gov/media/2018/180712.aspx.
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appropriate heightened security procedures to catch potential CEO Fraud/Business Email
Compromise, particularly in light of Cross River’s knowledge that Harborview did not conduct
foreign wire transfers.
62.
As a result of the hacking scheme, Cross River processed four (4) international wire
transfers (“Wire Transfers”) from Harborview’s Account as follows: $420,000.00 on August 16,
2018; $95,000.00 on August 17, 2018; $325,000.00 on August 24, 2018; and $955,000.00 on
August 27, 2018.
63.
Each transfer was directed to Hang Seng Bank in Hong Kong, an entity that was
flagged by Cross River’s Office of Foreign Asset Control control software on each of the Wire
Transfers.
64.
Upon receipt of each foreign wire transfer form, Cross River verbally contacted
only Harborview’s administrative staff person despite the fact that Cross River knew that the
individual was allowed to authorize only domestic wire transfers to verify the authenticity of the
wire.
65.
Cross River conducted the authorization process with the administrative staff
person in the exact same manner as it conducted authorizations for domestic wire transfers.
Despite the information Harborview made available to Cross River and Cross River’s knowledge
of its customer, or its duty to know its customer, Cross River did not question or discuss with the
administrative staff person the particulars of this transfer.
66.
Cross River’s acts and omissions were negligent and in direct contravention of the
policies and procedures which should have triggered a commercially reasonably procedure to
confirm whether the foreign wire transfer was authorized.
67.
Cross River’s failure to determine if these were authorized transfers was also
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contrary to its practice of monitoring Harborview’s accounts and questioning any transactions it
considered suspicious.
68.
In or about February 2018, Cross River questioned a deposit into a Harborview
account and demanded that Harborview provide documentation supporting the deposit of that
particular sum of money.
69.
Unlike its handling of the February 2018 deposit into a Harborview account, Cross
River did not conduct any investigation or require any documentation to support the withdrawal
of money from a Harborview account by foreign wire transfer, as it was required to per its own
KYC policy
70.
Based on Cross River’s efforts and procedures for monitoring funds deposited into
Harborview’s accounts, Harborview reasonably believed and expected that Cross River was
exerting the same effort and applying the relevant procedures for monitoring the disbursement of
Harborview funds.
71.
The administrative staff person that Cross River contacted regarding a wire transfer
to Hong Kong was a signatory for authorizing domestic wire transfers only. As a result of its
negligence in failing to obtain an authorization for a foreign wire transfer, Cross River is liable for
processing an unauthorized wire transfer to Hong Kong.
72.
Based on the information Cross River solicited from Harborview as well as Gade’s
and Cross River’s ongoing communications with the Kutners and Harborview, Cross River knew
or should have known that a transfer of funds to a foreign entity was not authorized, and could not
be authorized by administrative staff.
73.
For these reasons, Cross River knew or should have known that the lack of an
authorization for a foreign wire transfer required that Cross River utilize commercially reasonable
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procedures to determine whether the transfer of funds to a foreign entity, particularly a transfer to
Hong Kong, a well-known location for fraudulent transfers, was indeed authorized by the owner
of the account.
74.
Harborview reasonably relied on its communications with Cross River and Gade’s
assurances and promise that Harborview’s money would be protected to expect that policies and
procedures were in place or would be enacted to protect Harborview’s funds including, but not
limited to, the policies and procedures required to ensure that the Bank would not allow for an
unauthorized foreign wire transfer.
75.
For these same reasons, Harborview reasonably expected that Cross River had in
place commercially reasonable security measures which met the minimum industry standard
procedures for protecting Harborview’s accounts including, but not limited to, coding
Harborview’s accounts so as to allow for the processing of only domestic wire transfers and the
flagging of foreign wire transfers particularly for transfers to well-known centers for fraudulent
activity such as Hong Kong.
76.
Upon information and belief, Cross River had or should have had policies and
procedures in place to ensure—since Harborview had not identified a signatory for a foreign wire
transfer—that any attempts to conduct a foreign wire transfer would be barred pending the
application of commercially reasonable procedures to ensure the proper authorization for a foreign
wire transfer.
CROSS RIVER’S RELIANCE ON PURPORTED AUTHORIZATION.
77.
Cross River was not entitled to rely on the purported authorization it obtained from
an administrative staff person who was authorized only for domestic wire transfers for the
following reasons:
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a.
Cross River had or should have had internal policies and procedures, in addition to
industry-standard procedures, for heightened security in place and which it should have applied
for scrutinizing a foreign wire transfer, particularly where it knew the customer did not conduct
foreign wire transfers, and where the transfer was directed to Hong Kong to an entity which Cross
River knew or should have known Harborview had never done business with;
b.
Cross River conducted the authorization process for a foreign wire transfer form
for a transfer to Hong Kong in the exact same manner as it did all domestic wire transfers despite
its knowledge that (1) the administrative staff person was not designated to authorize foreign wire
transfers, and (2) the form designated a transfer to Hong Kong, a location which the Bank, not its
customer, knew was a prime destination for fraudulent transfers. After obtaining the required
signatures, Cross River called only the administrative staff person, as it would a domestic wire
transfer, to confirm authorization—the exact same process used for domestic wire transfers with
no enhanced procedures for a foreign wire transfer.
c.
Cross River knew that Harborview did not conduct foreign wire transfers. Despite
this knowledge, Cross River sent a foreign wire transfer form to a person not designated to
authorize a foreign wire transfer, and conducted the same process for authorization as it utilized
for a domestic wire transfer. Unlike it had done in challenging a deposit to a Harborview account
where it discovered potentially suspicious activity, Cross River did not conduct any additional
questioning, require additional documentation, or in any other manner investigate the proposed
foreign wire transfer as required under its own internal procedures and/or universally-accepted
procedures requiring a higher degree of scrutiny for a foreign transfer particularly to a location
such as Hong Kong;
d. Specifically, Cross River did not conduct a “heightened due diligence” review of four
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wires being sent to Tier 3 county as required by both its KYC and OFAC policies. This is despite
the OFAC software flagging each of the wires as a “potential match” before Cross River’s staff
deeming it a “false positive” for every one of the wires;
e.
Cross River failed to inform the customer that the recipient bank was flagged as a
“false positive” or that the wire room manager who made the determination that it was a false
positive did not regularly have her determinations audited, did not have regular training, or did not
have her practices aligned with bank practices;
f.
Cross River knew that Harborview did not conduct foreign business and did not
make foreign wire transfers. The account opening form information was available to all Cross
River employees, including the wire room staff at all times in Cross River’s customer information
database;
g. Despite this change in Harborview’s business practice, Cross River did not conduct an
investigation in Harborview, a “high risk” client. As required by its own KYC policy, when a
“triggering event”, including “changes in the nature of the account activity” occur, Cross River’s
policy requires a “site visit[] of high risk customers.” Ex C, p. 12. No such site visit occurred;
h. Cross River’s policy requires it to monitor for “significant changes in activity,
ownership, or public information about the client become known.” To accomplish this, Cross River
states that “The Bank uses an automated monitoring system in order to monitor account activity,
on an ongoing basis” and that this would be monitored on “a daily basis.” Ex. C, p. 20-21. This
daily review should have caught unusual activity related to “OFAC Screening”, “return item[s]”
and when “wire transfers that have no apparent business purpose to of from a foreign country”
that are “inconsistent with the customer’s legitimated business purpose.” Ex. C, p. 21-22. As a
result of these daily reviews, Cross River mandated it would be “initialing the Daily Account
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Review Log or the report printout.” Id. This was not done and as such Cross River was not
monitoring its customer’s authorizations as its own policies require;
i.
Cross River’s policy identifies that as to certain customers, there could be a higher
vulnerability to “identify theft, embezzlement, and fraudulent schemes.” As a result, the KYC
policy is designed to protect and look out for such patterns. While this policy is geared towards
“elderly individuals”, Cross River clearly had the means to identify fraudulent schemes but did not
employ it to a “high risk” account;
j.
Cross River knew of the existence of CEO fraud and how it operated and
Harborview’s particular susceptibility to said type of fraud. Based on its uniquely particular
knowledge of Harborview’s business, Cross River was in the position, and had assured Harborview
it was in the position, of taking the steps necessary to protect Harborview’s funds;
k.
Cross River knew that the signatories on the account data form were designated
only for domestic wire transfers, and were not designated to authorize foreign wire transfers;
l.
In order to secure Harborview’s business for Cross River’s benefit, Gade personally
assured Harborview that Cross River would keep Harborview’s money safe thereby implicitly
guaranteeing that Cross River had or would institute and apply the policies and procedures required
to protect Harborview’s funds;
m.
Based on Gade’s personal representations and promises and Cross River’s practice
of monitoring Harborview’s accounts and contacting Harborview about any activity Cross River
deemed suspicious, Cross River led Harborview to reasonably rely on and expect that Cross River
was monitoring Harborview’s account transfers, and would personally notify either Kutner or other
top management personnel of Harborview of any activity that was not in accordance with
Harborview’s written directions for account activity; namely, that only domestic wire transfers
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being could be authorized without additional scrutiny and investigation;
n.
Cross River’s practices due either to ignorance of its Harborview customer—or in
deliberately choosing to ignore the knowledge of its customer—were in contravention of standard
industry practices and its own policies and procedures, especially in light of Cross River’s unique
knowledge of and familiarity with Harborview’s business; and
o.
Cross River’s OFAC policy failed to provided sufficient protections from money
ending up in the hands of foreign bad actors.
CROSS RIVER’S RESPONSE TO THE FRAUDULENT TRANSFERS
A.
Cross River failed to promptly advise Harborview of the failed foreign wire
transfer.
78.
The initial foreign wire transfer of August 16, 2018 failed to properly process from
Cross River to Hang Seng Bank. Such failure occurred on August 16, 2018, and continued on
August 17, 18, 19, 20, and 21, 2018 with such foreign wire transfer failing to successfully occur
each time.
79. Each of the Fraudulent Transfers was subject to an OFAC “potential match”. Cross
River’s wire room manager flagged all wires as “false positives”. Cross River failed to identify
why so many consecutive, suspicious wires were all flagged as “false positives”. Had Cross River
engaged any security procedure, due diligence, or heightened due diligence into “false positives”,
such as comparing the hits against the business practices of Harborview, it would have
immediately identified that the fraudulent transfers were “suspicious activity” as identified by its
own policies and procedures.
a.
Cross River’s OFAC policy also failed to “address how it will determine
whether an initial OFAC hit is a valid match or false hit” as stated in the “Bsa/aml Manual”
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released by the FFIEC.5
b.
Cross River employees failed to provide a sufficient memo or log of why
the False Positive determination was made.
c.
Cross River’s “daily” audit failed to identify these false positives or flagged
so many false positives consecutively from the same entity.
80.
On August 17, 2018, Cross River learned that the initial foreign wire transfer of
August 16, 2018 was not successful. Yet, in contravention of industry standard security policies
and procedures for Harborview’s protection, Cross River failed to notify Harborview about the
failed foreign wire transfer until August 21, 2018.
81.
Specifically, on August 21, 2018, five (5) days after Cross River processed the
initial foreign wire transfer, Cross River first notified Harborview that the August 16, 2018 wire
transfer did not successfully transfer in contravention of the industry-standard security policies
and procedures which were or should have been in place and applied for Harborview’s protection.
82.
By failing to advise Harborview that the August 16 wire transfer did not
successfully transfer from August 16, 2018 through August 21, 2018, Cross River allowed the
matter to remain unresolved for five days. While the initial foreign wire transfer of August 16,
2018 was not successful, the remaining three (3) foreign wire transfers, totaling the sum of
$1,375,000.00 were successfully completed.
83.
None of the foreign wire transfers would have been made but for Cross River’s
failure to (1) obtain proper authorization for a foreign wire transfer, and/or (2) follow commercially
5
https://bsaaml.ffiec.gov/manual/OfficeOfForeignAssetsControl/01#:~:text=The%20bank's%20policies%2C%20proc
edures%2C%20and,match%20or%20a%20false%20hit.&text=Due%20diligence%20steps%20for%20determining,o
n%20the%20OFAC%20Web%20site.
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reasonable procedures to timely notify Harborview of the failed initial unauthorized foreign wire
transfer.
84.
Upon information and belief, Cross River either failed to institute or failed to follow
industry standard policies and/or the applicable federal banking regulations when it failed to obtain
the required authorization for a foreign wire transfer and further failed to timely notify Harborview
as to the failed wire transfer. This allegation is pled upon information and belief as Cross River
has failed and refused to turn over to Harborview the applicable banking policies that Cross River
maintained at the time of the subject failed wire transfer.
B.
Cross River failed to investigate the failed foreign wire transfer.
85.
In addition to failing to obtain the required authorization and failing to timely notify
Harborview of the failed August 16, 2018 foreign wire transfer, Defendant also failed and refused
to investigate the cause of the failed foreign wire transfer in accordance with the minimum industry
standards for said investigation.
86.
Cross River failed to exercise due diligence in order to determine the cause of the
failed wire transfer in accordance with commercially reasonable procedures and minimum industry
standards.
87.
Contrary to Gade’s prior history of direct communication with the Kutners
regarding important issues, neither Gade nor any of the “readily accessible” top management
personnel personally and directly contacted Kutner. Instead, Cross River informed only sent an
email on August 21, 2018, indicating that the wire did not successfully transfer.
88.
Cross River did not try to identify the source of the failure, nor did it reasonably
investigate why Cross River’s numerous attempts at resending the August 16, 2018 foreign wire
transfer failed.
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89.
This lapse in security on Cross River’s part exemplifies Cross River’s negligent
failure to institute and/or follow the minimum industry standards for providing the protection Gade
and Cross River had promised Kutner and Harborview.
90.
Had Cross River properly and reasonably investigated the failure of the August 16,
2018 foreign wire transfer in accordance with the promised security policies and procedures and
minimum industry standards, Cross River would have discovered that it had not obtained the
required authorization for a foreign wire transfer and thereby prevented the ensuing unauthorized
transfers.
91.
The loss of $1,375,000.00 by Harborview would not have occurred but for Cross
River’s failure to obtain the required authorization or to have implemented the commercially
reasonable security procedures for avoiding an unauthorized transfer and which required that Cross
River investigate the cause of the failed August 16, 2018 foreign wire transfer.
92.
The foreign wire transfers set forth above were not authorized by Harborview.
The loss of $1,375,000.00 by Harborview would not have occurred but for Cross River’s
negligence in processing an unauthorized foreign wire transfer.
93.
Despite the facts that (1) Harborview had made 1,171 solely domestic wire
transfers, (2) Gade and Cross River had indicated that policies and procedures were in place or
would be put in place to insure the security of Harborview’s funds, (3) Cross River had elicited
and was responsible for knowledge of the information that Harborview’s accounts would be used
for domestic wires only, and (4) Cross River knew or should have known that administrative staff
persons were authorized only for domestic wire transfers, Cross River allowed for an unauthorized
foreign wire transfer of Harborview funds.
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94.
At no point did Cross River utilize commercially reasonable procedures to confirm
authorization including, but not limited to, obtaining direct verbal authority from the President or
Managing Director of Harborview for the process of a foreign wire transfer.
95.
Given that the foreign wire transfers were international wire transfers as opposed
to domestic wire transfers, and that Cross River knew or should have known Harborview’s prior
instructions and directions, as well as Harborview’s established banking patterns, Cross River was
required to utilize commercially reasonable procedures including, but not limited to, contacting
the President and CEO and/or the Managing Director of Harborview to verbally confirm the
authenticity of these Wire Transfers.
96.
Further, given that (1) CEO Fraud was well known in the banking industry, (2) all
of Harborview’s prior wires were done domestically, (3) Cross River knew that the foreign wire
transfers in question were going to Hang Seng Bank located in Hong Kong, Cross River should
have utilized commercially reasonable procedures including, but not limited to, contacting the
President and CEO and/or the Managing Director of Harborview directly to verbally confirm the
authenticity of these wire transfers.
97.
Cross River exhibited bad faith in failing to directly contact the President and CEO
and/or the Managing Director of Harborview or take other commercially reasonable procedures to
confirm the authenticity of the foreign wire transfers.
98.
Cross River negligently failed to utilize additional commercially reasonable
procedures including, but not limited to, obtaining two distinct contacts within Harborview to
verify the authenticity of the foreign wire transfers.
99.
The loss of $1,375,000.00 by Harborview would not have occurred but for Cross
River allowing an unauthorized transfer and failing to utilize commercially reasonable procedures
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including, but not limited to failing to verbally contact the President and CEO and/or the Managing
Director of Harborview regarding the Wire Transfers.
C.
Cross River failed to follow commercially reasonable banking practices and
its own security measures to prevent CEO Fraud.
100.
Since Cross River processed the unauthorized and fraudulent foreign wire transfers,
$1,375,000.00 in funds belonging to Harborview were transferred to unauthorized third parties.
101.
Cross River had an obligation to know its customer and was aware or should have
been aware that Harborview did not conduct business with any foreign entity including, but not
limited to, the account holders at Hang Seng Bank in Hong Kong.
102.
Despite the industry knowledge of the way CEO Fraud schemes work, and the
particular vulnerability of companies in the real estate sector, Cross River failed to set up
appropriate heightened security procedures to catch potential CEO Fraud/Business Email
Compromise, particularly in light of Cross River’s knowledge that Harborview did not conduct
foreign wire transfers.
103.
As a result, in an act of bad faith and in breach of commercially reasonable security
procedures, Cross River negligently processed the foreign wire transfers though they reeked of
known fraud: (1) they were unauthorized transfers; (2) the CEO of Harborview was known to
travel frequently, as is typical in CEO Fraud cases; (3) the wires were directed to a bank in Hong
Kong, one of two countries known since at least 2015 to receive the large majority of fraudulent
CEO Fraud wires; and (4) Harborview, a real estate company particularly vulnerable to CEO
Fraud, had never previously wired ANY funds internationally.
104.
Cross River displayed bad faith and commercially unreasonable security
procedures when it failed to safeguard against the well-known CEO Fraud when setting up its
security and confirmation procedures; industry knowledge of how CEO Fraud works should have
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informed the development of commercially reasonable security procedures.
105.
The actions of Cross River, as set forth above, violated acceptable and reasonable
banking practices and procedures. As such, Cross River’s actions were not taken in good faith and
were not commercially reasonable.
106.
Further, upon information and belief, Cross River failed to follow its own security
procedures.
107.
As noted above, Cross River continues to refuse to provide Harborview with a copy
of the security procedures in place at the time of the relevant wire transfers.
108.
Cross River’s refusal to provide Harborview with its security procedures is contrary
to standard banking practice and, upon information and belief, a violation of Cross River’s own
practices and procedures.
109.
Further, upon information and belief, Cross River’s refusal to provide Harborview
with Cross River’s security procedures suggests that Cross River violated its own procedures, and
that Cross River violated standard banking practice and commercially reasonable banking
standards.
110.
Lastly, upon information and belief, since the events described in this Complaint,
Cross River enacted new and revised policies and/or procedures to prevent the recurrence of the
errors it made in this case. Cross River’s actions effectively acknowledge the inadequacy of its
former procedures as well as the feasibility of simple precautionary measures that it failed to
implement previously.
111.
The loss of $1,375,000.00 by Harborview would not have occurred but for Cross
River’s allowing an unauthorized foreign wire transfer, and Cross River’s failure to establish
and/or adhere to commercially reasonable security standards.
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D.
Cross River failed to recover the improperly wired funds.
112.
The foreign wire transfer funds were received at Hang Seng Bank by various
account holders.
113.
Such account holders maintained their bank account at Hang Seng Bank, which is
an affiliate bank of HSBC, and principal member of the HSBC Group.
114.
After the funds were fraudulently wired to the account holders at the HSBC
affiliate, Cross River continued to act negligently and in bad faith by failing to demand that the
HSBC affiliate return to its customer (Harborview) the wire transfer funds that were improperly
processed by Cross River.
115.
Further, Cross River learned that the account holders in Hang Seng Bank – the
recipients of the fraudulent wire transfers – maintained numerous accounts in Hang Seng Bank, an
affiliate of HSBC. Yet, Cross River failed to take reasonable steps and measures to recover the
funds from the HSBC affiliate.
116.
Cross River failed to act in good faith in allowing an unauthorized foreign wire
transfer and in failing to comply with commercially reasonable security procedures when
processing the wire transfers and failed to take reasonable steps and measures to recover the Wire
Transfers once they were improperly processed, which constitutes gross negligence and
carelessness on behalf of Cross River.
117.
In allowing an unauthorized foreign wire transfer, Cross River failed to institute
and/or comply with universally-accepted business protocols, practices and procedures instituted
and applied by all United States banks including, but not limited to, the know-your-customer
requirements of the Patriot Act.
118.
In allowing an unauthorized foreign wire transfer, Cross River failed to adhere to
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the universally-established business protocols, practices and procedures instituted and applied by
all United States Banks, including but not limited to those policies and procedures universally
applied where the transfers or transactions involve high crime areas, such as Hong Kong, and
including, but not limited to the know-your-customer requirements of the Patriot Act.
119.
In allowing an unauthorized foreign wire transfer, Cross River acted negligently
and negligently failed to institute, utilize, and apply internal business protocols, industry-standard
policies and procedures which are universally accepted and applied by all United States Banks.
COUNT I
(Violation of N.J.S.A. 12A:4A-201, 12A:4A-202 and 12A:4A-203)
120.
Plaintiff incorporates the allegations of paragraphs 1-119 as if more fully set forth
herein.
121.
N.J.S.A. §§ 12A:4A-201, -202 and -203 govern the issuance and acceptance of
payment orders by a bank.
122.
N.J.S.A § 12A:4A-201 sets out the definition of a “security procedure.”
123.
Pursuant to N.J.S.A. § 12A:4A-202(1), “A payment order received by the receiving
bank is the authorized order of the person identified as sender if that person authorized the order
or is otherwise bound by it under the law of agency.”
124.
Pursuant to N.J.S.A. § 12A:4A-202(2):
If a bank and its customer have agreed that the authenticity of payment orders issued
to the bank in the name of the customer as sender will be verified pursuant to a
security procedure, a payment order received by the receiving bank is effective as
the order of the customer, whether or not authorized, if (i) the security procedure
is a commercially reasonable method of providing security against
unauthorized payment orders, and (ii) the bank proves that it accepted the
payment order in good faith and in compliance with the security procedure and
any written agreement or instruction of the customer restricting acceptance of
payment orders issued in the name of the customer. [Emphasis added.]
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125.
Pursuant to N.J.S.A. ⸹ 12A:4A-203:
(1)
If an accepted payment order is not, under section 12A:4A-202(1), an
authorized order of a customer identified as sender, but is effective as an order of
the customer pursuant to section 12A:4A-202(2), the following rules apply:
(a) By express written agreement, the receiving bank may limit the extent
to which it is entitled to enforce or retain payment of the payment order.
(b) The receiving bank is not entitled to enforce or retain payment of the
payment order if the customer proves that the order was not caused, directly or
indirectly, by a person (1) entrusted at any time with duties to act for the customer
with respect to payment orders or the security procedure…
126.
Pursuant to N.J.S.A. ⸹ 12A:4A-202(1) and ⸹ 12A:4A-203, Cross River had a duty
to transfer Harborview funds solely subject to an authorized payment order.
127.
Cross River did not receive an authorized payment order in that the person
identified as the sender was not authorized to send a foreign wire transfer.
128.
Pursuant to N.J.S.A. § 12A:4A-202(2), Cross River had a duty to establish
commercially reasonable security procedures regarding wire transfers.
a.
According to Cross River’s Wire Room Policy, the use of a phone call is
designed to authenticate and verify a wire. The Wire Room Policy does not denote that a phone
call in any way is designed to be a security procedure or that the phone call should try to determine
whether the wire was being fraudulently generated.
b. Cross River’s reliance on a phone call does not appropriately fall under the
determination of a security procedure as no questions were asked by Cross River’s employees
about the nature of the transaction or that the transaction was a deviation from the pattern or
practice of a high-risk customer.
129.
Cross River further had a duty to safeguard the monies of Harborview by
transferring funds only through an accepted payment order under ⸹12A:4A-202(1), or ensuring
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that the order was an accepted payment order under 12A:4A-202(2), by establishing and following
commercially reasonable security procedures.
130.
Cross River further had a duty to safeguard against known hacking schemes
affecting the banking industry through establishing and following commercially reasonable
security procedures.
a.
Cross River failed to establish procedures that were sufficiently monitored
on a daily basis that were required by the policies themselves.
b.
Cross River failed to provide sufficient training and alignment to its own
staff as to all its employees to understand the difference between an authorization call and a
security procedure.
c.
Cross River failed to maintain a written policy to identify fraudulent
schemes such as CEO Fraud.
d.
Cross River failed to conduct an investigation into a high-risk client having
a “triggering event”.
131.
Cross River also had a duty to accept the payment order only if it was an
authorized payment order or was effective pursuant to N.J.S.A. § 12A:4A-202(2).
132.
Cross River had a duty to know its customer, including but not limited to the wire
transfer instructions provided by Harborview when they initially opened their accounts, and the
pattern of behavior that Harborview established following said openings.
133.
As set forth in all preceding paragraphs herein, Cross River violated the provisions
of N.J.S.A. § 12A:4A-202(2) by processing unauthorized Wire Transfer orders in connection with
the Account.
134.
As set forth in all preceding paragraphs herein, Cross River violated the provisions
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of N.J.S.A. § 12A:4A-202(2) by failing to maintain and/or adhere to commercially reasonable
security procedures to confirm whether the proposed foreign wire transfer was authorized.
135.
As set forth in all preceding paragraphs herein, Cross River violated the provisions
of N.J.S.A. § 12A:4A-202(2) by failing to maintain and/or adhere to a commercially reasonable
security procedure, which failure led directly to the theft of $1,375,000.00 from Harborview’s
Account by unauthorized transfers, of which Harborview informed Cross River immediately upon
discovery of said unauthorized transfers.
136.
In addition, as set forth in all preceding paragraphs herein, because Cross River, at
a minimum, (i) failed to ensure that it was transferring funds subject to an authorized transfer order,
(ii) failed to utilize commercially reasonable security procedures including, but not limited to
verbally confirming authorization for the transfers with the President and CEO and/or the
Managing Director of Harborview, or obtaining two verbal confirmations, (iii) failed to apply its
extensive knowledge of Harborview’s banking patterns and practices, (iv) failed to institute and/or
follow the applicable security procedures and policies, (v) failed to account for known CEO Fraud
schemes in its security procedures, and (vi) failed to maintain adherence to its own internal bank
policies, including but not limited to its Wire Room Policy, its Know Your Customer Policy, and
its OFAC policy.
137.
Accordingly, pursuant to N.J.S.A. § 12A:4A-203, the wire transfers were
unenforceable. Nevertheless, Cross River effectuated the transfers.
138.
N.J.S.A. § 12A:4A-204 states that if:
(1) a receiving bank accepts a payment order issued in the name of its customer as
sender which is (i) not authorized and not effective as the order of the customer
under section 12A:4A-202, or (ii) not enforceable, in whole or in part, against the
customer under section 12A:4A-203, the bank shall refund any payment of the
payment order received from the customer to the extent the bank is not entitled to
enforce payment and shall pay interest on the refundable amount calculated from the
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date the bank received payment to the date of the refund.
139.
Given the foregoing, pursuant to N.J.S.A. § 12A:4A-204, Cross River is liable for
its payment of unenforceable transfers, and thus must refund to Harborview the $1,375,000.00
stolen by way of the fraudulent transfers together with interest at the highest rate allowed by law
from August 27, 2018, and court costs.
WHEREFORE, Plaintiff, Harborview Capital Partners, LLC prays for judgment against
Defendant Cross River Bank on Count I of its Complaint in the principal sum of $1,375,000.00,
together with interest at the highest rate allowed by law from August 27, 2018, court costs, and for
such other and further relief as this Court deems just and proper.
JURY DEMAND
Plaintiff demands trial by jury of all claims and defenses in this action so triable.
By: /s/ A. Ross Pearlson
CHIESA SHAHINIAN & GIANTOMASI PC
A. Ross Pearlson, Esq.
Brigitte M. Gladis, Esq.
105 Eisenhower Parkway
Roseland, NJ 07068
Telephone: 973.325.1500
Facsimile: 973.325.1501
FRANKEL, RUBIN, KLEIN, PAYNE
& PUDLOWSKI, P.C.
Mayer S. Klein, Esq. (admitted pro hac vice)
231 S. Bemiston Avenue, Suite 1111
Clayton, MO 63105
Telephone: 314.725.8000
Facsimile: 314.726.5837
Attorneys for Plaintiff
Harborview Capital Partners, LLC
Dated: October 30, 2025
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