Recovery Options for Victims of Ponzi Schemes


Our Ponzi scheme attorneys have experience representing victims of complex financial scams. Ponzi schemes are a particular type of fraud that pays profits to earlier investors with funds raised from new investors. The name comes from Charles Ponzi, a man from Boston that launched a scheme promising investors a fifty percent return on their investment in postal coupons. Ponzi’s plan fell apart, like all Ponzi schemes do, when new investors could not be found to pay off the old ones. some of These schemes became well known when Bernie Madoff’s huge Ponzi scheme fell apart, leaving a wake of people that had lost their life savings. If you’ve been the victim of a Ponzi scheme, it’s important to know that it is often possible to bring an action to recover  the money you’ve lost. Call MDF Law PLLC for a free consultation at 800-767-8040 to discuss how your file your claim.

How To Avoid Ponzi Schemes

The best way to spot a Ponzi scheme is to use your intuition and follow the “no free lunch rule.” It’s important to keep in mind that a safe portfolio of income investments usually throws off 4% to 5% a year, so if you’re being promised 7% or 10%, you’re in risky territory. Risky investments aren’t necessarily Ponzi schemes, but are not wise choices for middle class people saving for retirement that cannot afford to lose the principal they invest. Researching the history and credentials of any financial advisor is a must, but it doesn’t guarantee that they haven’t recently taken a turn towards unscrupulous activities. If your financial advisor makes a suggestion that doesn’t feel right, it’s a good idea to consult with an unbiased third party that doesn’t have any connection to the original advisor. This level of due diligence should be applied to any investment that is not publicly traded and/or does not have to file financial records with the Security and Exchange Commission. Always remember – if it sounds too good to be true, it probably is. If you’ve been victimized by a Ponzi scheme, prompt action is required to recover the money you’ve lost. Call MDF Law PLLC for a free consultation at 800-767-8040.

What’s a Clawback Claim?

A clawback refers to the claims that a Trustee can make against persons and entities that were unjustly enriched by a Ponzi scheme or other fraudulent practice. It’s called a clawback because it “claws back” money that was illegally taken and uses it to return money to fraud victims. For example, any money that was paid out right before a company became insolvent will be presumed to have been unfairly preferential, and will be returned to the estate so that it can be divided among the creditors fairly. The financial industry is now making use of clawback provisions in executive employee contracts for bonuses and other types of incentive pay in order to protect their reputation when faced with poor performance, scandals, and misconduct. Clawbacks are effective both for discouraging misconduct and for creating a fund for angry clients that have lost money because they usually carry heavy penalties in addition to taking back the bonus or incentive pay. If you’ve been defrauded by a Ponzi scheme or any other type of financial misconduct, don’t jump to the conclusion that you’re out of luck. It’s important to speak to an attorney that has experience helping victims of Ponzi schemes reclaim their money. Deadlines for clawbacks can be short, so time is of the essence. Call MDF Law PLLC for a free consultation.

What Is a Fraudulent Conveyance?

A fraudulent conveyance is a sale of an asset with the intention of defrauding creditors. For example, selling your home to your sister because after you’ve been served with a lawsuit would likely be considered a fraudulent conveyance, especially if you sold the home for much less than it’s worth. For Ponzi schemes, receiving anything above your original investment is generally considered to be a fraudulent conveyance. This is because any amount of money greater than the principal invested is considered to be “fictitious profits” that are the property of other investors. Courts follow the general rule that all monies above principal should be returned to the investors, except for the investors who were aware of the scheme that could be required to return the entire amount they’ve withdrawn. When Ponzi schemes go bust, bankruptcy laws allow these false profits to be traced to their recipient and be returned as a fraudulent conveyance. If you’re wondering whether you can recoup your losses from a Ponzi scheme, it’s important to speak to a financial fraud attorney with experience in this area. Call MDF Law PLLC for a free consultation at 800-767-8040.

How Can Investors Recover Their Principal?

If you’re an innocent investor, with no knowledge of the fraudulent nature of the investment, you stand a good chance of recouping at least some of what you’ve lost. In addition to your rights as a creditor in bankruptcy court, there are additional ways to recover your losses through litigation. If the scheme was run through a registered brokerage firm, the firm can be held liable even if they did not know about it. Brokerage firms have a duty to supervise their brokers and can be successfully sued by clients that lost money due to fraudulent schemes by their brokers because the duty imposed on brokerage firms to implement a rigorous system of supervision could force them to pay back all the money you lost. Another way to recoup funds is through state “blue sky laws” that hold any financial institution liable for losses caused by fraud if they received any compensation whatsoever for their services. Since most schemes involve the use of a bank or other financial institution, these laws can sometimes be effective tools to help victims of Ponzi schemes recoup losses. The thought of suing the Ponzi schemer directly feels satisfying, but it’s rarely practical because once they’re caught they are usually quickly stripped of their assets. If you’ve lost money in a Ponzi scheme, it’s important to speak to an experienced ponzi scheme attorney as soon as possible after your loss. Call MDF Law PLLC at 800-767-8040 for a free consultation.

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