When a Ponzi scheme collapses, it is often because the fraudster has found it difficult to recruit new investors, while existing investors have tried to cash out their positions and the scheme gets exposed and collapses. Because a Ponzi scheme does not typically revolve around a solvent business model, but simply uses new investor money to pay old investors, the scheme requires a constant flow of new money to survive.
Victims may be able to recover financial assets that were lost to the Ponzi scheme from various third parties, including insurance companies who insured companies that assisted the Ponzi scheme. Scott Silver can advise you on your legal options regarding insurance and Ponzi scheme loss recovery, while investigating what other entities may be liable for damages in a civil lawsuit.
In a Ponzi scheme, the party that is primarily liable is the person or entity running the scheme. Unfortunately, most or all of that money might no longer be in their possession. This means that recovering money from the actual Ponzi schemer may not always be a viable route to recovery. A standard insurance policy will not usually pay for these kinds of losses, because many of the provisions of these policies specifically exclude recovery for intentional fraud.
However, certain types of insurance policies can fall outside of these frameworks. For example, if an investment bank or other company’s executives were involved in managing the fraudulent scheme, a Directors and Officers (D&O) liability policy may provide for partial financial recovery depending on the fine print.
Some injured investors may be able to recover losses from a Ponzi scheme through fidelity insurance. Financial institutions typically buy fidelity insurance to pay for losses incurred by the dishonesty or fraud of its employees.
Claims pursued through fidelity insurance policies are particularly complex and difficult to win but may constitute a viable path to recovery in some instances. It is crucial for injured investors to consult with an experienced Ponzi scheme attorney to understand what recourse is available in a specific scenario.
Apart from an insurance carrier, Ponzi scheme victims may be entitled to seek loss recovery from numerous third parties who enabled or facilitated the fraud. These parties may be liable even if they unknowingly helped to perpetrate the Ponzi scheme. Commercial banks, brokerage firms, and investment banks are a few examples who might have had poor due diligence procedures in place that allow the scheme to continue without detection.
Investors can often file a lawsuit against the direct or third-party perpetrators of the scheme. Both individual and class action litigation can be valuable tools in these situations.
When the Ponzi scheme collapses, courts may appoint a receiver or a bankruptcy trustee to manage and claw back assets from the fraudulent entity. Investors may then receive some funds commensurate with their losses.
Existing insurance policies can be one route to recover a portion of your losses from those who misused your money for unlawful gains. The Ponzi scheme perpetrator, banks, and other financial institutions that enabled the fraud can also be held liable for investor losses.
You should avoid contacting any individuals or entities that you believe to have been involved in the scheme, and instead reach out to Scott Silver and the Silver Law Group. We understand the financial toll that a Ponzi scheme can have on your life and livelihood. Our firm will leave no stone unturned when it comes to asset recovery efforts. Contact us today to receive your free consultation and discuss the next steps of your potential claim.
