Victims of an alleged $100 million Ponzi scheme orchestrated by a Kentucky rancher dubbed the “Bernie Madoff of cows” have filed suit against lenders for allegedly failing to heed red flags, according to a report.
Brian McClain, of Benton, Ky. — who died by suicide at age 52 on April 18, 2023, just days before the fraud was uncovered — is accused of orchestrating a yearslong “ghost cattle” scheme that promised investors 30% returns while relying on borrowed money to pay off early participants.
Last week, McClain’s victims filed a class action lawsuit against Community Financial Services Bank, Rabo AgriFinance and Mechanics Bank – alleging that the lenders enabled the fraud and ignore “clear signs of misconduct, causing devastating financial losses for dozens of Kentucky investors.”
News of the lawsuit was reported by The Independent.
“CFSB strongly denies the allegations in question, and believe the claims against the bank to be entirely without merit,” the bank said in a statement to The Post.
“The bank through counsel has filed a Motion to Dismiss in the suit brought by the bankruptcy trustee.”
McClain’s operation appeared to grow on paper — but in reality, the livestock didn’t exist, according to Drovers Magazine, a trade publication covering the beef cattle industry.
According to those familiar with the case, the business relied on a classic Ponzi scheme structure, where new investments were used to pay earlier backers. As his paper herd grew, the gap between reality and records ballooned.
The scheme collapsed in April when officials at Rabo AgriFinance, McClain’s primary lender, discovered a massive discrepancy in inventory.
While McClain claimed to have 88,000 head of cattle, only about 10,000 were found during an audit, exposing the bulk of the herd as “ghost cattle,” according to a lawsuit cited by Drovers.
The fallout has shaken the local agricultural community and left many investors grappling with financial losses and a sense of betrayal.
Many of McClain’s alleged victims were people from his own community — friends and neighbors who say they were blindsided by someone they trusted. His promises of unusually high returns lured in dozens of investors, some of whom initially received payouts that appeared legitimate.
After McClain’s death last year, representatives from Rabo AgriFinance seized the remaining cattle from McClain’s operation and sold them through Blue Grass Stockyards.
Three of McClain’s companies — McClain Farms in Benton, Ky.; 7M Cattle Feeders in Hereford, Texas; and McClain Feed Yard in Friona, Texas — filed for bankruptcy on April 28, 2023 in US Bankruptcy Court for the Northern District of Texas.
The US Department of Agriculture said unpaid livestock sellers may be protected under the Packers and Stockyards Act of 1921, which requires that all livestock purchased by a dealer in cash sales, along with any receivables or proceeds from those livestock, be held in trust for the benefit of unpaid sellers.
Bernie Madoff was a former Nasdaq chairman who ran the largest Ponzi scheme in history, defrauding thousands of investors by using new money to pay fake returns to earlier clients.
His scheme, which created the illusion of nearly $65 billion in profits, collapsed in 2008 during the financial crisis. Madoff pleaded guilty in 2009 and was sentenced to 150 years in prison, where he died in 2021 at age 82.
The Post has sought comment from Rabo AgriFinance, Mechanics Bank, the USDA and trustees.
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