Recently, there have been numerous Georgia articles discussing the ponzi scheme committed by Marietta attorney, Robert P. Copeland. Mr. Copeland, a real estate attorney, was charged by federal prosecutors with operating a ponzi scheme from 2004-2009. In total, Mr. Copeland duped 125 investors out of $28 million. In a recent article in the Dalton Daily Citizen, U.S. Attorney David Nahmias stated, “But we hope this case sends a second message as well. This defendant came forward, reported his crimes, and pledged his full cooperation, which has already resulted in numerous seizures of assets that will be restored to the victims.”
What Mr. Nahmias did not say, however, how the assets will be distributed to investors. You need to pay attention to this because you may be entitled to more than a pro rata share of the seized assets if you can trace your money. Typically, when the U.S. Government seizes the assets of a fraudster, the Government distributes the money seized back to investors on a pro rata basis. This means that if the government seizes $10 million from a fraudster and there are 125 victims, each victim receives from the restitution fund a percentage of the $10 million based on how much each victim invested. For example, if the total amount of the fraud totals $28 million and Investor A invested $2.8 million, Investor A would receive 10% of the $10 million or $1 million.
This may seem fair on the surface. What if Investor A invested the $2.8 million a week before the Government seized the assets and the money can be traced to the fraudster’s bank account? Is is fair for Investor A only to receive $1 million out of $2.8? Maybe not.
Does the U.S. Government have unfettered discretion to distribute the funds anyway it sees fit? The answer is no. Victims of Ponzi schemes have the right to petition the Court and challenge the Government’s discretion. If you can trace your funds, you may be able to establish a constructive trust on the money. In simple terms, this means that title to the money never transferred to the fraudster. Therefore, the Government did not have the right to seize the funds in the first place. If Investor A, for example, can establish a constructive trust on the $2.8 million, he or she is entitled to receive $2.8 million, not $1 million.
If you are a victim in this situation, our firm has handled these types of cases.