So what happens if you’re the victim of a fraud or Ponzi scheme, but the scammer already spent all of the money they stole? Maybe you sent money to a Bitcoin or crypto scam. Where else can you get money to recoup your losses? We will look at the U.S. Department of Justice Asset Forfeiture & Money Laundering guide to identify your options to recoup funds as a victim. Remember, we’re not attorneys, and we’re not giving you legal advice; this is an overview of what we’ve seen from other fraud cases.
According to the U.S. Department of Justice Asset Forfeiture & Money Laundering guide, 21 U.S. Code § 853 Criminal Forfeutires section, “Property subject to criminal forfeiture, any person convicted of a violation is punishable by imprisonment and shall forfeit any property constituting, or derived from the proceeds the person obtained, directly or indirectly, as a result of such violation” So if a scammer obtained proceeds from the scam, the funds and any property used to commit the scam are at risk.
For example, someone owns an office building and uses that office to commit a scam. Even if the office wasn’t obtained from the scam, it was used in the scam, and in theory, the government could forfeit that asset.
What about a property that’s been transferred to someone else? According to the same US code, “any property that is subsequently transferred to a person other than the defendant may be subject to forfeiture” Unless this person can show that it was for a specific purpose.
Third parties can be held liable in some cases, like the Scott Rothstein case in Florida. Rothstein is a disbarred attorney who ran a large Ponzi scheme. At one point, he purchased a bunch of jewelry from a watch company. Because the Ponzi scheme funded this big purchase, the watch company had to return all the money they received.
Now, it extends to any other property. Suppose a person is convicted of this type of scam. In that case, all of their property is subject to forfeiture unless it was acquired outside of the time period of the violation and there was no likely source for the property other than the violation. So the government can do what’s called substitution.
If a scammer squandered all of the money they took from their victims, they could replace that with other assets, even if those assets were not a direct result of the scam. We’ve seen this done many times. For example, let’s say someone has a million-dollar home, and then they start a Ponzi scheme and steal a million dollars from victims. But they spend the full million on vacations, dinners, and experiences, and it’s gone.
The government will look for similarly valued assets to substitute the money that has been spent. If the property resulting from a scam isn’t available, they can substitute the property. They can also forfeit on the civil side all raw materials used for manufacturing the scam, including vehicles and vessels.
So if you’re the victim of a fraud or Ponzi scheme, this is what the government can do. A lot of times, you can use these on the civil side to replace assets that have been taken from you by false pretenses or misrepresentations. Remember, when recovering assets that were lost in a scam or fraud have many avenues available for fund recovery, maybe a third party, replacement, assets, or the assets that the scammer directly used to take your money.