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Innocent Investors in Ponzi Schemes Should be Entitled to Equitable Credit
Once a Ponzi scheme is uncovered, investors deceived by the scam typically suffer two blows. First, they learn that they have been victimized by a con artist, that they may recover only a fraction of their investment, and that they will probably have to wait years before getting any of their money back. Worse, such investors are also likely to be sued in so-called “claw-back” lawsuits, in which a bankruptcy trustee seeks to compel them to return monies they received that they thought were either returns of principal or returns on their investments.
It is not uncommon for the investor to have invested new funds in the Ponzi scheme after receiving a distribution from the fraud perpetrator but before the ruse was uncovered. The question arises whether defendants in fraudulent conveyance actions should be entitled to a credit for such reinvestments. For example, assume the defendant originally invested $10 million, received a $1 million distribution in the form of a “dividend” one year later, and then invested an additional $200,000, all without having any reason to know that he or she was being deceived by a Ponzi scheme. Once the scheme comes to light, bankruptcy ensues and a trustee is appointed, should the trustee be permitted to recover the full $1 million from the investor? There is ample precedent to support the conclusion that it is appropriate for courts to exercise their equitable discretion so as to credit recipients of fraudulent transfers for pre-petition, post-transfer payments made to debtors.
The DOJ's Corporate Enforcement Policy: One Year Later
The DOJ's Criminal Division issued three declinations since the issuance of the revised CEP a year ago. Review of these cases gives insight into DOJ's implementation of the new policy in practice.
The DOJ's New Parameters for Evaluating Corporate Compliance Programs
The parameters set forth in the DOJ's memorandum have implications not only for the government's evaluation of compliance programs in the context of criminal charging decisions, but also for how defense counsel structure their conference-room advocacy seeking declinations or lesser sanctions in both criminal and civil investigations.
Use of Deferred Prosecution Agreements In White Collar Investigations
This article discusses the practical and policy reasons for the use of DPAs and NPAs in white-collar criminal investigations, and considers the NDAA's new reporting provision and its relationship with other efforts to enhance transparency in DOJ decision-making.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.