Fraudulent Conveyance Law in Context of Ponzi Schemes Clarified by Recent Decisions

March 01, 2007

Two recent decisions by bankruptcy courts in the Southern District of New York have addressed the application of fraudulent conveyance law to alleged Ponzi schemes. A Ponzi scheme may be generally described as a fraudulent investment scheme whereby money contributed by defrauded investors is used to pay overstated principal and/or false profits to earlier investors (who may have been equally defrauded) in order to induce new investment and otherwise prolong the fraud.

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