Sentinel Capital Management’s bankruptcy trustee Frederick J. Grede has filed suit against the Bank of New York Mellon Corp. (BONY), which acted as custodian of securities on behalf of Sentinel and its customers, clearing agent for Sentinel’s securities transactions, and lender to Sentinel.

Grede asserts that BONY established a fundamentally flawed account structure for Sentinel’s accounts that commingled customer assets and facilitated the misuse of customer assets. That allowed BONY to apply the proceeds securities transactions involving customer assets to pay down a portion of Sentinel’s debt to BONY.

Grede goes on to say that BONY aided and abetted breaches of fiduciary duty committed by Sentinel insiders, who misused customer securities for their own benefit and causing Sentinel to lose hundreds of millions of dollars. Further, he says that BONY knowingly colluded and facilitated the misconduct.

He also says that BONY knowingly accepted fraudulent and preferential transfers as part the insiders’ scheme, engaged in inequitable conduct and violated the Commodity Exchange Act and the Investment Advisers Act of 1940.

Here’s the 121 page complaint with exhibits.