Ponzi Schemes

The term “Ponzi scheme” was named after Charles Ponzi, a criminal from the 1920s who persuaded thousands of investors to invest in a complex price arbitrage scheme involving postage stamps. A Ponzi scheme uses investment funds from new customers to pay purported profits or returns to existing investors. Perpetrators of a Ponzi scheme can keep losses hidden from clients through the issuance of false account statements or trade confirmations that bolster account performance with the hopes of soliciting new investment funds from customers. Ponzi schemes usually collapse when the fraudster is unable to secure new investment funds or when too many investors seek redemptions of their investments to the same time.

One infamous Ponzi scheme was the fraud perpetrated on thousands of investment customers by Bernard Madoff. Lax & Neville LLP has significant experience in representing victims of Ponzi schemes, particularly those affected by the Bernard L. Madoff Investment Securities LLC Ponzi scheme and the Agape World Ponzi scheme.

Since 2008, when Bernard Madoff revealed his fraud, Lax & Neville LLP has been one of the handful of law firms that has remained at the forefront of the litigation regarding the notorious Madoff Ponzi scheme. Our firm has represented hundreds of investors in all areas of Ponzi scheme litigation, including assisting victims file claim forms with the Securities Investor Protection Corporation (SIPC). Additionally, Lax & Neville LLP was one of the lead counsels involved in litigating the “net equity” issue which related to how the Bankruptcy Court and Trustee would determine how to calculate the equity value of a customer’s Madoff account. Specifically, on March 3, 2011, founding partner Barry Lax appeared before the United States Court of Appeals for the Second Circuit to argue that Judge Lifland’s net equity decision, which stated that the net equity should be determined by netting a customer’s deposits against withdrawals during the entire lifetime of the account, should be overturned, as the lower court inaccurately decided the definition of "Net Equity" under the Securities Investor Protection Act ("SIPA"). A copy of the Net Equity hearing transcripts can be found here.

Lax & Neville LLP has successfully prepared and filed hardship applications for Madoff victims suffering extraordinary financial hardship.

Furthermore, our attorneys are experienced litigators with years of experience in dealing with Ponzi scheme litigation and adversarial proceedings brought by trustees seeking to "clawback" funds transferred to victims by Madoff.

Lax & Neville LLP has also successfully defended various clawback, fraudulent conveyance, and preference claims asserted against investors by the bankruptcy trustee presiding over the Agape World Inc. (Nicholas Cosmo) Ponzi scheme.

Do not be a victim a second time. Trust our law firm for advice on these issues. Our lawyers understand what is at stake for our clients, and strive to protect their reputations, finances and businesses. Our comprehensive background helps us evaluate the strategies the opposing side is likely pursuing. Contact us to schedule a free consultation with an attorney.

New York Securities Lawyer Blog - Ponzi-scheme
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