In Ponzi schemes and other fraud recovery efforts, we tend not to be big fans of the court appointed receiver process. It is not that we dislike receivers – in full disclosure we sometimes do receivership work.
We don’t like the process because too often victims wait for years only to receive pennies on the dollar. Instead of quickly pursuing possible third party claims, they mistakenly believe that the courts and court receivers will somehow get back their money. By the time they discover they are only going to get nickels, it is often too late to pursue other remedies.
Victims of Ponzi schemes and other large frauds have but just a few ways to recover their hard earned money. Those methods are restitution, receivership and litigation. Let’s look at the benefits and shortcomings of each.
Restitution is usually ordered in criminal prosecutions. Sadly most Ponzi schemers don’t face criminal charges and are not sent to prison. If they are prosecuted, however, the court can order restitution. Unfortunately job prospects for convicted felons are not great in this economy. Even worse, if the defendant is sent to prison, the prospects of ever seeing any money diminish greatly. Knowing that the person who ripped you off is scrubbing prison floors for 5 cents an hour might give you personal satisfaction but it doesn’t put money back in your pocket.
Many victims we speak with are frustrated to learn that most restitution orders remain unpaid. Why? Because a court order is just a piece of paper. If the defendant is in prison or unemployed, there simply is no remedy to enforce the order.
Receivers offer more hope. A receiver is a person appointed by the court to find and collect assets and return the proceeds to the victims. Often associated with civil and regulatory actions, they sometimes occur in criminal cases as well.
Most receivers work very hard yet once again, there are efforts can only be successful if there are assets located and liquidated. The primary advantage of receivers is that the cost of collection is spread over many victims.
There are downsides, however. Because receivers are appointed by the court to represent an entire class of victims, any recovery by the receiver must be divided equally. Let’s say that you and 9 other people each invested $50,000 in a real estate scam. Whereas it might be cost prohibitive for any single person to pursue collection, the court orders a receivership. If the receiver gets $100,000 each victim would receive just $10,000 less any fees charged by the receiver.
Like restitution orders, receiverships rarely even come close to paying 100 cents on the dollar.
Although we sometimes act as receivers, usually we are hired by victims to pursue third party actions. Individual third party collections are usually beyond the purview of what receivers do.
We will use the same example but this time, you purchased your $50,000 investment share from an investment advisor and the other 9 purchased from other stockbrokers, advisors or the promoter directly. A receiver likely won’t prosecute these individual third party claims. We do, however.
Just like shoes, one size does not fit all when it comes to fraud recovery.
Our general recommendation is not to rely on the courts to get back your hard earned money. Successful fraud recovery requires speed and skill. We have seen many brokerage firms go out of business after being pursued by multiple fraud victims. Being first in line can mean the difference of getting paid or getting nothing.
A good fraud recovery lawyer is one who examines all your options. Of course, if there is no criminal or regulatory action against the fraudster, the only choice may be litigation. Fraud recovery work, however, can often be handled on a contingent or “success” fee basis depending on the facts of the case.
If you lost money in a real estate fraud, Ponzi scheme, 1031 exchange TIC fraud, or other type of investment fraud, seek a competent fraud recovery lawyer immediately. Also make sure if there is a receiver already appointed by the court that you register your claim.
Currently we are assisting over a dozen people who lost their money in a Ponzi scheme involving Nikolai Battoo and Private International Wealth Management (PIWM). There were over 800 victims yet after 5 years, 140 still haven’t registered with the receiver. That is akin to leaving money on the table.
Some folks will never hire private counsel yet not signing up with receiver is just foolish. The good guys can win!
The fraud recovery lawyers at Mahany & Ertl have helped victims across the United States. If you have lost money in any type of fraud and those losses are over $500,000 ($100,000 if a stockbroker claim), give us a call. Most of our clients are highly successful, educated people – losing money in a fraud happens to everyone. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct).