Cahaly v. Benistar Property Exchange Trust Co.

Neel, Stephen E., J.

This litigation arises out of improper option and margin trading by defendant Daniel Carpenter (Carpenter) of the plaintiffs’ monies held by Benistar Property Exchange Trust Co., Inc. (Benistar) in qualified intermediary escrow accounts pursuant to 26 U.S.C. §1031(a)(3). Beginning in 1998, Benistar deposited the funds in margin accounts at Merrill Lynch, Pierce, Fenner & Smith, Inc. (Merrill Lynch or Merrill) and used the funds to engage in aggressive, high-risk uncovered option trading. Ultimately, Benistar lost more than $8 million of the plaintiffs’ money.3 These…