Third-Party Liability in Ponzi Schemes and Scams
Over the years, you’ve heard us talk a lot about third-party liability in Ponzi schemes and scams. How does that work?
Victims Seeking Recovery
Well, when somebody scams money from victims like in a Ponzi scheme or embezzlement, many times the victims look to recover their money, recover their funds, recover their assets by going and finding out where the bank account is for that person who stole their money, or suing them, or grabbing their real estate. But in some cases, the person may be tough to find, or maybe they don’t have too many assets.
Legal Theory: Third-Party Liability
So what happens is there’s a legal theory called third-party liability or vicarious liability, and that means that there may be third parties who, even though they weren’t part of the actual fraud or the crime, enabled the fraud, enabled the scam, or extended the scam, and may have liability because they basically made it easy for the scammer to do this.
Common Third Parties Involved
A lot of times those third parties are banks, accountants, attorneys, advertising companies, and there have been many cases where this has proved successful. The Bernie Madoff case, one of the biggest Ponzi schemes in history, had third-party liability. The Scott Rothstein fake attorney case in Florida had that too.
Recent Case Example
And here we go again here’s a major bank that is being sued for a $300 million Ponzi scheme. Over 10 years, 1,000 investors lost money, and what they’re alleging is that the scammer was able to commit their fraud more easily because this bank didn’t make it hard for them to open up accounts or to identify fraud or to red-flag activity. That’s usually what the process is.
Legal Advice Disclaimer
Now remember, we’re not attorneys, we’re not giving legal advice, so get good legal advice on this. But make sure that your investigation into fraud is also looking for possible third parties. Are there accountants, are there business agents, are there salespeople who enabled this fraud and may have liability, and may help get the recovery back?
Conclusion
Because it’s a whole lot easier to find the assets and get money from a bank than from some scammer or Ponzi scheme fraudster who’s hiding somewhere overseas. A lot of times, the low-hanging fruit comes from more obvious targets.
