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Clawback Litigation

Lax & Neville LLP represents individuals targeted by lawsuits for the recovery of money or property under the Securities Investor Protection Act of 1970 (SIPA) or the United States Bankruptcy Code. We are currently representing hundreds of victims of Bernard L. Madoff Investment Securities, LLC fraud and Ponzi scheme.

Avoidance (“clawback”) actions are often brought by a trustee or receiver in bankruptcy court after a Ponzi scheme or fraud is revealed. Clawback actions are commenced by the bankruptcy trustee or receiver to recover funds distributed to victims or investors by the fraudster operating the Ponzi scheme or fraud. Clawback litigations are one of the core focuses of Lax & Neville LLP’s clawback litigation defense practice and our attorneys are aware of the latest legal opinions related to avoidance actions. Clawback actions are brought pursuant to sections 547 and 548 of the United States Bankruptcy Code in a bankruptcy proceeding against entities and individuals who have received payment from a bankrupt debtor or an insolvent entity. Two types of clawback actions are fraudulent transfer actions and preference actions.

  • Fraudulent Transfer Actions: A fraudulent transfer is any transfer or obligation made in the years prior to the filing of a bankruptcy that were made with the actual intent to hinder, delay or defraud a present or future creditor. Under section 548 of the Bankruptcy Code, the debtor may avoid fraudulent transfers and recover any property of the estate that was fraudulently conveyed to a third party. Absent a fraudulent intent, a transfer may still be avoidable as “constructively fraudulent” under the Bankruptcy Code, and applicable state law, when the transfer was made in exchange for less than reasonably equivalent consideration or value and the (i) debtor was insolvent at the time of the transfer; (ii) the debtor was rendered insolvent as a result of the transfer; or (iii) the transfer was made to an insider of the debtor. In the context of the Bernard L. Madoff Ponzi scheme, the trustee is seeking to avoid transfers of funds advanced by Bernard L. Madoff Investment Securities, LLC to its customers with the hopes of redistributing these funds to other customers who lost some or all of their principle investment. Lax & Neville LLP attorneys represent clients in various avoidance actions. This experience gives our attorneys a unique understanding of the merits of each case, allowing us to best formulate a potentially winning strategy that may resolve the case in a manner most favorable to our client.
  • Preference Actions: Preference actions are commenced by a trustee or receiver when the debtor or insolvent entity makes certain transfers to an individual or an entity during the 90 days prior to the debtor entering bankruptcy. Bankruptcy trustees may view these transfers as preferential or unfair, and seek to remedy that alleged unfairness by recovering the money from the recipients through a preference action. Bankruptcy Code section 547 provides the statutory authorization for the bankruptcy trustee to attempt to avoid certain transfers made during the 90-day period prior to the filing of a bankruptcy petition by the debtor. The theory allowing bankruptcy trustees to seek recovery through commencing preference actions is that the debtor was already insolvent at the time the payments were made and allowing the payments to remain with the recipients would give preferential treatment to certain creditors over others. Our team provide strategic negotiation and strong representation to those being targeted in preference litigation.

At Lax & Neville LLP, we have extensive experience representing investors in clawback litigation. Our lawyers understand what is at stake for our clients, and strive to protect their reputations, finances and businesses. Contact us to schedule a free consultation with an attorney.

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