Straits Fin. LLC v. Ten Sleep Cattle Co.

Ten Sleep, Wyo. cattle rancher tells his investment broker to close an account. Instead, the broker does some unauthorized trading and loses $2 mil. The broker obfuscates, then resigns from his firm; the firm seeks to recover the $2 mil from the rancher, first from the rancher’s other account at the firm (which has a positive balance less than $2 mil) and then sues for the rest. District court: The rancher got defrauded. But he didn’t pay sufficiently close attention to his account statements, so he gets reduced damages. Seventh Circuit: He gets full damages. Fraud victims are expected to take reasonable steps only after they become aware of the fraud; they are not required to take precautions that, with the benefit of hindsight, would have avoided the fraud or ended it sooner.

Tags: 2018, Fraud, Investment Fraud, Seventh Circuit

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