After a Ponzi scheme collapses, trustees or receivers can be appointed to oversee the liquidation process, as well as distribute assets in Ponzi scheme bankruptcies.
The Ponzi scheme attorneys at Silver Law Group represent investment fraud victims while also working alongside bankruptcy trustees or SEC receivers who are appointed to recover stolen assets. Silver Law Group frequently pursues claims against third parties who bear responsibility for investor losses while working cooperatively with a trustee or receiver. If you or someone you know has lost money due to fraud, do not hesitate to contact us about compensation and asset recovery.
Ponzi schemes are fundamentally insolvent long before they collapse. They only continue as long as the fraudster has money from new investors to pay earlier investors with.
Frequently, once investors start to question the scheme, try to withdraw cash, or other events cause the flow of new investor cash to stop, the scheme quickly unravels. Because the venture was never actually profitable and simply relied on new capital to maintain the illusion of profitability, by the point the scheme is discovered, the perpetrator has usually lost most of the money investors contributed.
Ponzi schemes frequently go into bankruptcy once the flow of new funds stops and/or large numbers of investors want to withdraw funds simultaneously. The schemer and/or the enterprise behind it will often file for a liquidation bankruptcy, as there is typically no viable business to reorganize. Investors may sometimes recoup assets distributed by the trustee in a Ponzi scheme bankruptcy, including taking advantage of clawback provisions to recover funds that were lost.
In other circumstances, the SEC shuts down a Ponzi scheme and appoints a receiver to collect the assets of the Ponzi scheme, and while these cases are guided by a different set of rules, they are analogous to how a bankruptcy works. As these cases can be complex, experienced counsel can help guide an investor through the process or pursue claims that are unique to their situation.
After the bankruptcy proceedings are initiated, a bankruptcy trustee will typically be appointed to oversee the liquidation process. The goal is to recover as much money as possible through various actions under the Ponzi scheme bankruptcy so recoverable assets can be distributed fairly to creditors and injured investors.
Bankruptcy courts tend to grant trustees considerable power to investigate and collect assets that were defrauded. The bankruptcy trustee may use numerous legal mechanisms, including fraudulent conveyance and clawback laws, to recover these lost funds.
These actions can actually be used to get back payments the scheme previously distributed to investors, particularly those who invested early and received back more than they initially invested. While these parties were unwitting participants in the Ponzi scheme, victims may be forced, in some cases, to turn over a portion of the money they received that was the product of the fraud.
This means that the bankruptcy trustee can be legally empowered to claw back or recover funds paid to investors who still managed to make a profit in order to compensate other investors who suffered net losses from the scheme. The trustee will carefully evaluate each investor’s involvement to separate these net winners from the net losers, and fairly distribute the funds recovered.
Ponzi scheme victims can have other legal recourse to get their money back. Individual lawsuits or class action litigation against culpable third parties in the scheme can result in a favorable recovery. An attorney can analyze your situation and the potential sources of financial compensation that enable you to get back as much money as possible.
Identifying and distributing assets in Ponzi scheme bankruptcies can be a deeply complicated process. Scott Silver, along with the team of securities fraud attorneys at Silver Law Group, have successfully handled many Ponzi scheme cases through the years and are known for fighting tirelessly for those who were targeted with their investments.
Our firm often retains bankruptcy trustees and SEC receivers to help return as much of your money as possible. Contact us today to receive your free and confidential consultation.