Compeer Financial vs $60M Check-Kiting Fraud by Hog Farms

A sophisticated check-kiting scheme involving three South Dakota hog farms has left Compeer Financial, a member-owned Farm Credit cooperative, facing losses of approximately $36 million. The case highlights significant vulnerabilities in cross-border financial monitoring and the challenges of secured agricultural lending.

Compeer Financial filed a lawsuit in South Dakota District Court against Sunwold Farms, Sunterra Farms, and Lariagra Farms, alleging they engaged in a massive check-kiting operation that created artificial account balances by continuously writing checks between accounts at different banks without sufficient funds. The scheme involved:

• Daily transfers of nearly identical amounts between Compeer and Canadian Western Bank (CWB)

• Approximately 18 checks totaling $16.6 million moving between accounts each day

• Individual checks strategically kept between $800,000 and $990,000, just below regulatory scrutiny thresholds

• Total fraudulent transfers amounting to billions of dollars over several months8

The scheme collapsed in February 2025 when Compeer stopped honoring checks, revealing that the Canadian Western Bank accounts were overdrawn by approximately $21 million. 

Subsequently, CWB dishonored 65 checks totaling $59.9 million that had previously been credited by Compeer, instantly transforming the defendants' $21 million positive cash balance into a $36 million debt.

Cross-Border Banking Vulnerabilities

The case exposes significant weaknesses in monitoring cross-border transactions between U.S. and Canadian financial institutions:

• The scheme exploited the time delays in check processing between international banks1

• Regulatory barriers prevented direct communication between Compeer and CWB, with Sunterra refusing to authorize information sharing between the banks

• The fraud continued despite Canada having established cross-border funds transfer reporting requirements specifically designed to detect suspicious transactions

Secured Agricultural Lending Challenges

The case highlights the unique risks associated with agricultural lending against livestock collateral:

• The three farms had pledged approximately 110,000 hogs as collateral for an $11.5 million loan from Compeer

• When the fraud was discovered, Compeer faced the immediate challenge of ensuring the animals' continued care to preserve collateral value

• The specialized nature of the collateral (live animals requiring ongoing care) created urgent concerns about asset preservation

Receivership and Bankruptcy

On March 28, 2025, U.S. District Court Judge Eric Schulte appointed Pipestone Management II as receiver to:

• Take control of the three companies' operations

• Ensure the continued care of approximately 110,000 pigs

• Investigate financial transactions and preserve evidence

The court determined all three swine operations were insolvent or in "imminent danger" of insolvency. On April 11, 2025, Sunterra Enterprises Inc. and many of its subsidiaries filed notices under the Bankruptcy and Insolvency Act, with total liabilities reported at approximately $140 million.

Broader Implications

This case demonstrates that even sophisticated financial institutions with established risk management practices remain vulnerable to fraud schemes. It also illustrates how secured lending structures can still result in substantial losses when collateral requires ongoing maintenance and care, as is common in agricultural settings.

The appointment of a receiver represents an extreme but necessary measure to preserve asset value in this distressed situation, with Compeer continuing to fund animal care despite the fraud to protect its collateral interest.

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