Top 10 Tips for Ponzi Victims

by Tal Lifshitz | February 2019

Charles Ponzi

  1. Don’t Panic. You are not alone. You’re not the first to be duped and, unfortunately, you won’t be the last. But there are steps to be taken, and time may be of the essence. Allow yourself to feel angry. You should be. But then take action.
  2. Recognize that you are a victim. Don’t blame yourself. You should not have seen this coming. It is not your fault. Fraudsters are great at what they do, and others fell for the same scheme. Be angry at the fraudster – not yourself.
  3. Cut off communications. Don’t speak to the fraudster. Don’t ask for an explanation. Don’t threaten legal action or calling the authorities. You are not likely to convince them to give your money back. They will continue to lie, cheat, and steal to keep their scheme afloat. Your communications with them are wasted energy.
  4. No social media. What you say now can be used against you in any future recovery efforts. Your statements are evidence. Don’t create bad evidence. Something careless like “I knew it was a fraud all along” on Facebook can cripple any potential future recovery.
  5. Be cautious about taking payments from the fraudster. Whether it’s a check or wire transfer. If this money is stolen from another investor, which is likely, then accepting those funds can expose you to fraudulent transfer/clawback actions. In other words, you might have to give that money back later, and if you refuse you could be sued. And that hurts.
  6. Gather and preserve your evidence. Documents related to your investments. Communications with the fraudster or his associates. Marketing materials. Emails. Text messages. Voicemails. Bank statements. This is all critical evidence that can be very useful to an attorney who tries to recover your investment in future litigation. There are also legal obligations to preserve evidence, and failure to comply with this obligation could have severe consequences in any future litigation or recovery efforts.
  7. Talk to an attorney. You may have options. A direct suit against the fraudster may be an option, but is unlikely. Fraudsters rarely have significant assets available to reimburse their investor victims. They’ve spent their money on lavish lifestyles and the like. But fraudsters don’t act alone. They rely on professionals like banks, accountants, and law firms to give their schemes legitimacy. These professionals may have liability if they had knowledge of wrongful conduct and nevertheless assisted the fraudster. There are law firms that specialize in these types of suits. Consulting with an attorney in this field can be invaluable as you are investigating your options.
  8. Consider advising the authorities and other investors. Talk to an attorney about this as well. The Securities and Exchange Commission (SEC), U.S. Department of Justice (DOJ), Financial Industry Regulatory Authority (FINRA), and other government agencies may be very interested in hearing about your situation, especially if it’s not already on their radar. Likewise, other similarly situated investors might have useful information for you as you evaluate your options. There is strength in numbers.
  9. Accept that you may not be made whole. Full recoveries, while rare, are not unheard of. But the unfortunate reality is that fraudsters don’t hold on to the fruits of their scheme. They spend the money as quickly as it comes in, leaving the investors holding the bag once the house of cards collapses. Your attorney, if you choose to proceed with one, should explore all potential avenues of recovery on your behalf. Just know that it’s a long and winding road. Which leads us to…
  10. Be patient. Litigation takes time, especially complex investor fraud actions that very often involve parallel regulatory proceedings like a bankruptcy involving a trustee who pursues claims on behalf of the bankruptcy estate, or an SEC action involving a receiver who pursues claims on behalf of the receivership estate, or a criminal prosecution against the fraudsters. You, as an investor, should have your own advocate, dedicated exclusively to protecting your rights. But navigating this web takes time and expertise even for the most skilled and experienced counsel. Be ready.
Kozyak Tropin & Throckmorton

Tal Lifshitz
Tal concentrates on complex litigation while specializing in class actions, financial fraud, and Ponzi schemes. Prior to joining the firm he served as a judicial law clerk to the Honorable Kenneth A. Marra, and currently serves as a Director of the Board for the South Florida Chapter of the Federal Bar Association.

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