When your clients come to you in distress after finding out they have unwittingly invested in a Ponzi scheme, you need to take immediate action. You need to determine the depth of their involvement and to obtain and review whatever documents show the extent of their knowledge or lack of it concerning the workings of the Ponzi scheme. And, perhaps most importantly, you have to advise and prepare them for the possibility that a court-appointed trustee or receiver will initiate clawback litigation and that it could cost them a lot of money.
Avoidance actions, often styled as actions to recover fraudulent transfers, filed in bankruptcy courts or state or federal courts to claw back net profits resulting from Ponzi schemes, even when the investor was ignorant of the scam, can be costly – and complicated. Often, it’s to your client’s advantage to avoid civil and commercial business litigation in South Florida related to such schemes. Because clawback claims are almost always set for mediation before trial – and sometimes even before a suit is filed – finding the right mediator for your client’s case is key.
Ponzi Schemes: Fertile Ground for Civil and Commercial Business Litigation in South Florida
Ponzi schemes stir up strong emotions in their victims, many of whom lose significant amounts of money and then are ashamed of having been duped. While much of their anger and resentment will be aimed at the perpetrators of the scheme, some will inevitably fall on anyone who profited from it – even unknowingly.
The two keys to defending your client’s interests are to 1) begin a clawback strategy long before civil and commercial business litigation in South Florida against your client becomes a reality, and 2) to identify a professional mediator with Ponzi clawback experience who can conduct mediation from a place of experience and knowledge. While choosing the right mediator doesn’t guarantee any sympathy or relief for your client, at least it will guarantee an approach designed to reach an acceptable settlement and significantly reduce or sometimes even eliminate costs of litigation.