FDIC Receiver Shield: No Non‑Customer Bank Duty Absent a Recorded Fiduciary Account Agreement

1. Introduction

This appeal arose from an alleged cryptocurrency investment fraud centered on Q3 I, L.P. (“Q3I”), a Delaware limited partnership formed to pool investor funds for a purported “proprietary algorithmic cryptocurrency trading strategy” managed by its general partner, Q3 Holdings. By late 2019, more than 150 limited partners allegedly invested over $33 million.

According to the complaint, there was no trading algorithm and virtually no trading; instead, insiders diverted investor money from Q3I’s Signature Bank accounts through Q3 Holdings and onward to personal accounts. Q3 Investments Recovery Vehicle, LLC (“Q3IR”), as assignee of claims of 73 investors, sued Signature Bank in New York Supreme Court for common law and gross negligence.

The state court dismissed the claims. While the appeal was pending, Signature Bank failed, the FDIC was substituted “as receiver,” removed the case to federal court, and the district court adopted the state-court decision “as its own.” The Second Circuit affirmed.

Central legal issues:

• Whether a bank owes a duty to non-customers to protect them from fraud perpetrated through a depositor’s accounts.
• Whether Q3IR plausibly alleged that Q3I’s account was a fiduciary account, triggering New York’s narrow “duty of inquiry” exception.
• Whether 12 U.S.C. § 1823(e) independently bars claims against the FDIC premised on any unwritten fiduciary-account understanding.

2. Summary of the Opinion

The Second Circuit reaffirmed the general New York rule that banks do not owe non-customers a duty to protect them from the intentional torts of the bank’s customers. It recognized a narrow exception for fiduciary accounts—but held Q3IR failed to plausibly allege that Q3I opened such an account for the benefit of limited partners.

The court emphasized two independent failures:

• Pleading failure under New York duty law: Q3IR alleged only conclusorily that the account was fiduciary; on the complaint’s own description, Q3I did not “manage funds on behalf of investors” in a fiduciary capacity, but rather accepted contributions in exchange for limited partnership interests.
• Federal recording bar: Even if bank employees believed the account had fiduciary characteristics, 12 U.S.C. § 1823(e) protects FDIC receivership assets from unwritten agreements. Q3IR did not allege a written fiduciary account agreement satisfying those requirements.

Accordingly, dismissal was affirmed, and the court declined to reach Q3IR’s argument that the state court considered documents outside the complaint because the complaint failed even without those documents.

3. Analysis

3.1 Precedents Cited

Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006)

Lerner supplies the baseline rule: “Banks do not owe non-customers a duty to protect them from the intentional torts of their customers.” The panel treated this as the default position that Q3IR had to overcome by fitting within a recognized exception. The fraud’s severity did not alter the duty analysis; the question remained whether New York law recognized a duty flowing from Signature Bank to the investors (who were not the bank’s customers).

Home Sav. of Am., FSB v. Amoros, 233 A.D.2d 35 (N.Y. App. Div. 1997)

Amoros provides the narrow exception: a depositary bank can be “held answerable” for misappropriations from a fiduciary account if it has “actual knowledge or notice” of diversion, and “facts sufficient to cause a reasonably prudent person to suspect” misappropriation trigger a “duty of inquiry.”

Critically, the Second Circuit used Amoros to frame the dispositive threshold question: is the account fiduciary? The court also corrected Q3IR’s “three-part test” framing, explaining that the test relates to a bank’s heightened obligations once an account is fiduciary; it is not a test for deciding whether an account is fiduciary in the first place.

In re Agape Litig., 681 F. Supp. 2d 352 (E.D.N.Y. 2010)

In re Agape Litig. reinforced the narrowness of New York law in this area: there is no case “which even suggests” New York imposes on banks a duty to protect non-customers from fraud involving ordinary depository accounts. This citation functions as a boundary marker, preventing expansion of the fiduciary-account exception into a general anti-fraud monitoring obligation for banks.

Wallace ex rel. Cencom Cable Income Partners II, Inc., L.P. v. Wood, 752 A.2d 1175 (Del. Ch. 1999)

Wallace was used to identify where fiduciary duties lie in a limited partnership: “the general partner of a limited partnership owes direct fiduciary duties to the partnership and to its limited partners.” The Second Circuit relied on this to show that even if “fiduciary duty” language is present in the investment relationship, it does not follow that the partnership entity’s operating bank account is a fiduciary account held for the limited partners.

A.W. Fin. Servs., S.A. v. Empire Res., Inc., 981 A.2d 1114 (Del. 2009)

Cited by analogy, A.W. Fin. Servs. supported the proposition that the entity itself may not owe fiduciary duties to equityholders (there, the issuing corporation to stockholders). The Second Circuit used this contrast to underscore the mismatch between (i) investors’ expectations of fiduciary-like protections and (ii) the legal reality of who owes fiduciary duties to whom.

3.2 Legal Reasoning

The court’s reasoning proceeded in layered steps that effectively required Q3IR to satisfy both state-law duty and federal receivership-recording constraints:

1. Start from no-duty to non-customers. Under Lerner, Signature Bank presumptively owed no duty to investors who were not its customers.
2. Identify the only relevant exception pleaded: fiduciary account + knowledge. Under Amoros, the duty-of-inquiry framework activates only for misappropriations from a fiduciary account, and then only with actual knowledge/notice or red flags sufficient to trigger inquiry.
3. Reject conclusory “fiduciary account” labeling. The complaint’s statement that investment documents “demonstrated” the account was fiduciary was deemed conclusory. The court looked to the complaint’s own description of the transaction: limited partners exchanged funds for a partnership interest in returns, not for individualized asset management by Q3I on their behalf.
4. Use Delaware partnership principles to locate fiduciary duties. Even assuming fiduciary duties existed in the broader relationship, Wallace indicates the duty runs from the general partner to limited partners and to the partnership. That did not translate into a bank-level recognition that Q3I’s depository account was a fiduciary account for limited partners.
5. Find no allegation of bank knowledge that the account was fiduciary for limited partners. The opinion stressed the absence of allegations that Signature Bank had “actual, implied, or written knowledge” that the account was fiduciary for the benefit of limited partners; the “operating account for the partnership entity” characterization pointed the other way.
6. Apply 12 U.S.C. § 1823(e) as an independent bar against the FDIC. Even if bank personnel inferred fiduciary attributes, federal law requires such agreements to be in writing to be enforceable against the FDIC as receiver. The complaint did not allege a written fiduciary account agreement.

The outcome is thus best understood as a two-key lock: (1) plead a fiduciary account recognized as such by the bank under New York law; and (2) when the FDIC is receiver, plead compliance with federal recording requirements so any fiduciary-account status is not merely unwritten inference.

3.3 Impact

Although nonprecedential, the order is consequential for litigation strategy in fraud cases involving failed banks:

• Constrains “deep pocket” theories against banks for customer fraud. Plaintiffs who are non-customers face a steep duty hurdle unless they can plead a genuine fiduciary account (and the bank’s cognizable awareness of it).
• Raises documentation stakes when the FDIC is involved. The explicit reliance on 12 U.S.C. § 1823(e) signals that plaintiffs must plead (and ultimately prove) that any account features that “tend to diminish or defeat” the FDIC’s interest are properly memorialized in writing.
• Clarifies that entity structure is not enough. Merely presenting partnership documents or asserting that investors were owed fiduciary duties does not equate to alleging that the bank account was a fiduciary account for those investors.
• Encourages ex ante account formalities. Funds intended to be held for investors may need explicit account titling and written agreements identifying fiduciary capacity and beneficiaries, particularly where later FDIC receivership is conceivable.

4. Complex Concepts Simplified

Non-customer vs. customer

A “customer” is typically the account holder. Here, Q3I (the partnership) was the customer; the limited partners were not. New York law generally does not make banks responsible to outsiders for wrongdoing by the bank’s customers.

Fiduciary account

A fiduciary account is an account held by someone (the fiduciary) for the benefit of others (beneficiaries), such as a trustee holding trust funds. Under Home Sav. of Am., FSB v. Amoros, fiduciary status matters because it can trigger a bank’s duty to investigate suspicious diversions from that fiduciary account.

Duty of inquiry

If a bank knows (or has red-flag notice) that funds in a fiduciary account are being misappropriated, it must make a reasonable inquiry; failing to do so can result in the bank being treated as if it had the knowledge the inquiry would have uncovered.

12 U.S.C. § 1823(e) recording requirement

When the FDIC becomes receiver for a failed bank, federal law protects it from claims based on side understandings that were not properly recorded. In practical terms, plaintiffs cannot rely on an alleged unwritten agreement or informal understanding (including inferred fiduciary features) to impose liability that would reduce the value of assets the FDIC acquired.

5. Conclusion

The Second Circuit affirmed dismissal because Q3IR did not plausibly allege that Q3I’s Signature Bank account was a fiduciary account for the benefit of limited partners, as required to escape New York’s general no-duty rule for non-customers under Lerner v. Fleet Bank, N.A. and to invoke the narrow fiduciary-account exception described in Home Sav. of Am., FSB v. Amoros.

Separately and decisively in the FDIC receivership posture, the court held that 12 U.S.C. § 1823(e) forecloses theories dependent on unwritten fiduciary-account understandings. The key takeaway is that, for non-customer fraud victims pursuing a failed bank (or the FDIC as receiver), liability hinges not on the moral force of the alleged fraud, but on whether the account was genuinely fiduciary—and whether that fiduciary status was properly documented in a way enforceable against the FDIC.