A federal appeals court Thursday tossed out a $564 million jury verdict against BMO, which held the bank liable for aiding and abetting a $3.7 billion Ponzi scheme orchestrated by businessman Tom Petters.

Petters was convicted in 2009 and sentenced to 50 years in prison for conspiracy, wire and mail fraud after luring investors and laundering money through accounts at Marshall & Ilsley Bank, which BMO acquired in 2011 for $4.1 billion.

A three-judge panel at the 8th U.S. Circuit Court of Appeals overturned the 2022 jury verdict on the grounds Douglas Kelley, the court-appointed trustee for Petters Company, Inc., could not recover money for creditors because that firm had helped execute the Ponzi scheme.

A New York court had made a similar decision in a case involving former Nasdaq chair and convicted fraudster Bernie Madoff.

“The court ruled that ‘[t]he debtor’s misconduct is imputed to the trustee because, innocent as he may be, he acts as the debtor’s representative,’” the judges cited from the Madoff case. “Bankruptcy law does not provide a vehicle for [Petters Co.] or its trustee to proceed unbound by PCI’s own wrongdoing.”

“PCI was created solely to operate the Ponzi scheme. Even assuming that the bank aided the scheme to the degree that Kelley alleges, BMO cannot be more culpable than the entity that orchestrated the scheme,” they wrote.

BMO said it plans to reverse a C$1.19 billion ($875.5 million) provision it made in relation to the case, resulting in an expected after-tax recovery of C$875 million ($643.7 million) to be recorded in the fourth quarter and treated as an adjusting item.

BMO said in a prepared statement that it was “very pleased” with the court’s decision.

The bankruptcy trustee did not return requests for comment by Crain’s or Reuters.