A Ponzi scheme is a fraudulent investment scam where payments to early investors use money from new investors rather than from genuine profits or business activity. While this creates the illusion of a profitable venture, the scheme relies on a constant stream of new investors. The scheme collapses if the influx of new investors slows down or if investors demand their money back.
The crucial role played by SEC receiverships in Ponzi scheme litigation helps recover stolen funds for defrauded investors. Our Ponzi scheme attorneys frequently work alongside court-appointed receivers who trace and recover assets while pursuing actions against those who benefited from the scheme but may not be the subject of an SEC Receiver’s claims.
If a Ponzi scheme collapses, victims (investors) and authorities (such as the SEC) may pursue legal actions to recover lost funds and hold the perpetrators accountable. Injured investors may also sue the operators such as financial institutions, commercial banks, lawyers, or auditors who helped facilitated the scheme.
Through Ponzi scheme class actions, victims combine their claims into a single lawsuit, pooling resources and leveraging to recover losses from the perpetrators. A class action lawsuit offers several benefits and allows victims to combine their financial resources for legal costs and amplify their leverage against fraudsters.
Ponzi scheme cases can be complex, involving multiple parties, jurisdictions, and financial transactions. A major challenge is tracing and recovering stolen assets or assets used to fund the scheme, which can be difficult when they have been transferred or hidden.
If the SEC investigates and identifies a Ponzi scheme, they can seek the appointment of a receiver by a federal court as part of the litigation process. Securities class action lawsuits and SEC enforcement actions (which can lead to receiverships) can occur simultaneously or independently.
The SEC often seeks the appointment of a receiver if it believes a company or individual may be at risk of wasting or dissipating assets, especially in fraud cases such as Ponzi schemes, which can result in millions in investor losses. The receiver’s primary duties include taking control of and protecting assets, filing claims on behalf of the entity placed into receivership, and distributing assets to defrauded investors, plaintiffs, or creditors through a court-approved plan.
In a Ponzi scheme litigation, the court appoints a receiver to act as an officer of the court, tasked with protecting the assets of the fraudulent entity and pursuing legal remedies to recover funds for defrauded investors.
A key function of the SEC receiver is to pursue ‟clawback” claims. This means the receiver seeks to recover payments made to investors (so-called ‟winning investors”) and others who benefited from the Ponzi scheme. Payments made to early investors that were derived from the fraudulent scheme, and rightfully belong to the defrauded investors who appeared later in the scheme, can be clawed back.
Receivers work to trace and recover the assets of the Ponzi scheme, often through litigation against those who received payments or who aided and abetted the fraud. Our firm can explain how an SEC receiver factors into your claim for compensation in a Ponzi scheme lawsuit.
Silver Law Group frequently works with SEC receivers, serving as counsel to the receiver to help recover assets for creditors. We also directly represent investors in cooperation with an SEC receiver to pursue claims against those involved in fraud. Our firm typically handles cases on a contingency fee basis, meaning that if no money is recovered, you owe nothing to the firm for attorney’s fees.
One frequent misconception is whether the Receiver or a Bankruptcy Trustee can pursue claims against third party professionals such as banks, auditors, or law firms for aiding and abetting the fraud. Frequently, the Receiver does not have the right to pursue these claims because the claims are not part of the estate. Instead, investors must pursue these claims directly against the other wrongdoers. Silver Law Group is a top law firm for representing investors in claims against these third parties. We consistently work in cooperation with the receiver to help prosecute these claims and are recognized for our experience on these types of cases.
Getting a return of your lost investments can be difficult but not impossible. If you have lost money to a Ponzi scheme, contact our attorneys about SEC receiverships in Ponzi scheme litigation. We maintain close relationships with regulators and receivers as we investigate and file claims. Silver Law Group offers free and confidential case consultations, and we handle claims on a contingency fee basis so you pay us nothing unless the money is recovered.
