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Read to the end. They're suing people who took their money out, reclaiming it into the bankruptcy trust, and disbursing it (even though these people didn't brea

Read to the end. They're suing people who took their money out, reclaiming it into the bankruptcy trust, and disbursing it (even though these people didn't break any laws). The fund didn't actually have all of the money that they're confiscating for disbursement.

alexbeloi 9y ago
If somebody robbed a bank and gave you the money, there would be an expectation that you would have to return that money, 'possession of stolen property' and all that. The fact that the money was given in the form of investment returns doesn't change that. I think we can all agree that each investor should get their principal investment back. I don't think there's a good argument for letting people keep the impossibly high returns on that principal.
- cm2187 9y ago
  And if you sold a car to that bank robber without knowing it was a robber you would have to reverse the transaction?
  - alex_hitchins 9y ago
    Depends if the car was bought with stolen money or traded for stolen goods. If so, then I'd say yes.
    - lotsofpulp 9y ago
      Should everyone expect every transaction to be subject to clawback? Employees have no guarantee their pay is final, vendors have no guarantee their pay for products delivered will be paid for, etc?
      - Spooky23 9y ago
        The law generally renders those contracts null and void. You never technically hold title to stolen goods or things purchased with stolen goods.
        lotsofpulp 9y ago
        Is this for any contract? If someone steals $20 and buys some food, does the food merchant now have to return the $20 and suffer the loss? I've never heard of any situation like this. Usually, this type of liability is in events such as vehicle, house, land, or business purchases for which there is title insurance. But if the buyer does the due diligence, and they're not aware of any illegitimate funds being used, how much should they suffer? How much should the person who it was stolen from be liable?
        Spooky23 9y ago
        Yes. The title to the property never transfers away from the original victim. If I steal a pen and sell it to you for $1, the owner can compel you to return it, and you need to go after me for your dollar. Obviously in reality the hassle is often not worth it. This is one of the reasons that banks and companies are so obnoxious and seemingly overreactive to risk.
        lotsofpulp 9y ago
        I wonder how it would work in an employer/employee relationship. I can't imagine the government recouping an employee's pay from an employer who has been stealing, assuming the employee is not aware of the theft. Could evading taxes and paying employees be considered stealing from taxpayers, which the employees have to pay back? I see the hazard in letting people keep stolen goods, as it might be hard to prove they were or weren't knowledgeable of that fact allowing thieves to get away with it, but at the same time how far does a government get to go in determining which of your assets belongs to you.
        Spooky23 9y ago
      - yardie 9y ago
        Credit card, debit card, and ACH transactions (i.e. checks) can be reversed up to a certain amount of time. Chargebacks are part of the hidden costs of running a business. Nobody likes them but it’s part and parcel of almost every merchant agreement. If you’ve been overpaid and have direct deposit your employer can reverse the entire or partial payment. It’s been that way for years.
        lotsofpulp 9y ago
        Those are erroneous transactions, different from what was being discussed. I'm referring to party A transacting with party B, and B doesn't know A is using illegitimately obtained funds, why should B be penalized? Obviously this is different in the case of things such as vehicles and houses, which have titles and legal checks that can be done to make sure they are legitimate, but even then as long as the buyer has done due diligence, they shouldn't be penalized otherwise trust in the market will erode.
        alex_hitchins 9y ago
        IANAL, the law I was looking for I can't find - can just locate this which isn't directly related[0]. Perhaps I need to look more at the proceeds of crime. Interesting point you raise. I know the police can confiscate the proceeds of crime, and if I buy a car that is stolen it's not legally mine, however as to whether if the money used to purchase the item was stolen, well. Would it be fraud then? If so, I'd still think obtaining goods by deception would cover the car being reclaimed if possible. [0] https://www.legislation.gov.uk/ukpga/1968/60/crossheading/offences-relating-to-goods-stolen-etc https://www.legislation.gov.uk/ukpga/1968/60/crossheading/of...
  - x0x0 9y ago
    First, Picard (the trustee) can only clawback transactions for six years per NY law. Second, from https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad... he seems to have primarily gone after people who knew, or should have known, that Madoff was doing something fraudulent. eg, from the article, > On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard filed a lawsuit [38] against J. Ezra Merkin, seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund, and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent. There were at least 500 instances in the last ten years when his Madoff account statements showed large blocks of stock bought or sold at prices that did not match the stock’s trading range for the day when the transactions supposedly occurred.
    - charlesdm 9y ago
      Or he didn't look closely enough into what was happening. He might not have been very capable, just lucky. "Should have known" is not an answer to (potential) incompetence or stupidity. Given his funds went bankrupt, he probably did not know.
      - x0x0 9y ago
        The law seems to take a dim view of sophisticated investors who pretty clearly could have trivially found something fishy and instead chose not to look. Deliberate ignorance apparently gets clawbacks.
- mrleiter 9y ago
  There is something called "bona fide purchase" [0]. As I am not familiar with US common law, I am not sure it would apply here, but basically: an innocent purchaser (no ill intentions etc...) can purchase stolen goods and become their rightful owner. [0] https://en.wikipedia.org/wiki/Bona_fide_purchaser https://en.wikipedia.org/wiki/Bona_fide_purchaser
  - Fnoord 9y ago
    That's for physical goods I guess. Theres also a counter law for that. In Dutch called heling, English Wikipedia page explains it [1] [1] https://en.m.wikipedia.org/wiki/Handling_stolen_goods https://en.m.wikipedia.org/wiki/Handling_stolen_goods
- jjeaff 9y ago
  In the case of these clawbacks though, they aren't only taking the returns. They are taking it all, to be redistributed evenly. So in this case, even if you got your principle out early, you are probably going to have to share in the loss equally with everyone else when all is said and done.

alexbeloi 9y ago

If somebody robbed a bank and gave you the money, there would be an expectation that you would have to return that money, 'possession of stolen property' and all that. The fact that the money was given in the form of investment returns doesn't change that. I think we can all agree that each investor should get their principal investment back. I don't think there's a good argument for letting people keep the impossibly high returns on that principal.

cm2187 9y ago
And if you sold a car to that bank robber without knowing it was a robber you would have to reverse the transaction?
- alex_hitchins 9y ago
  Depends if the car was bought with stolen money or traded for stolen goods. If so, then I'd say yes.
  - lotsofpulp 9y ago
    Should everyone expect every transaction to be subject to clawback? Employees have no guarantee their pay is final, vendors have no guarantee their pay for products delivered will be paid for, etc?
    - Spooky23 9y ago
      The law generally renders those contracts null and void. You never technically hold title to stolen goods or things purchased with stolen goods.
      - lotsofpulp 9y ago
        Is this for any contract? If someone steals $20 and buys some food, does the food merchant now have to return the $20 and suffer the loss? I've never heard of any situation like this. Usually, this type of liability is in events such as vehicle, house, land, or business purchases for which there is title insurance. But if the buyer does the due diligence, and they're not aware of any illegitimate funds being used, how much should they suffer? How much should the person who it was stolen from be liable?
        Spooky23 9y ago
        Yes. The title to the property never transfers away from the original victim. If I steal a pen and sell it to you for $1, the owner can compel you to return it, and you need to go after me for your dollar. Obviously in reality the hassle is often not worth it. This is one of the reasons that banks and companies are so obnoxious and seemingly overreactive to risk.
        lotsofpulp 9y ago
        I wonder how it would work in an employer/employee relationship. I can't imagine the government recouping an employee's pay from an employer who has been stealing, assuming the employee is not aware of the theft. Could evading taxes and paying employees be considered stealing from taxpayers, which the employees have to pay back? I see the hazard in letting people keep stolen goods, as it might be hard to prove they were or weren't knowledgeable of that fact allowing thieves to get away with it, but at the same time how far does a government get to go in determining which of your assets belongs to you.
        Spooky23 9y ago
    - yardie 9y ago
      Credit card, debit card, and ACH transactions (i.e. checks) can be reversed up to a certain amount of time. Chargebacks are part of the hidden costs of running a business. Nobody likes them but it’s part and parcel of almost every merchant agreement. If you’ve been overpaid and have direct deposit your employer can reverse the entire or partial payment. It’s been that way for years.
      - lotsofpulp 9y ago
        Those are erroneous transactions, different from what was being discussed. I'm referring to party A transacting with party B, and B doesn't know A is using illegitimately obtained funds, why should B be penalized? Obviously this is different in the case of things such as vehicles and houses, which have titles and legal checks that can be done to make sure they are legitimate, but even then as long as the buyer has done due diligence, they shouldn't be penalized otherwise trust in the market will erode.
        alex_hitchins 9y ago
        IANAL, the law I was looking for I can't find - can just locate this which isn't directly related[0]. Perhaps I need to look more at the proceeds of crime. Interesting point you raise. I know the police can confiscate the proceeds of crime, and if I buy a car that is stolen it's not legally mine, however as to whether if the money used to purchase the item was stolen, well. Would it be fraud then? If so, I'd still think obtaining goods by deception would cover the car being reclaimed if possible. [0] https://www.legislation.gov.uk/ukpga/1968/60/crossheading/offences-relating-to-goods-stolen-etc https://www.legislation.gov.uk/ukpga/1968/60/crossheading/of...
- x0x0 9y ago
  First, Picard (the trustee) can only clawback transactions for six years per NY law. Second, from https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Madoff_investment_scandal https://en.wikipedia.org/wiki/Recovery_of_funds_from_the_Mad... he seems to have primarily gone after people who knew, or should have known, that Madoff was doing something fraudulent. eg, from the article, > On May 7, 2009, Madoff Bankruptcy Trustee, Irving Picard filed a lawsuit [38] against J. Ezra Merkin, seeking to recover almost $500 million withdrawn from Madoff accounts in the last six years. The complaint alleges that since 1995, Merkin steered more than $1 billion to Madoff through three private hedge funds, Ascot Partners, Ariel Fund, and Gabriel Capital. Since 2002, the funds withdrew at least $494 million from Madoff — returns that Merkin “knew or should have known” were fraudulent. There were at least 500 instances in the last ten years when his Madoff account statements showed large blocks of stock bought or sold at prices that did not match the stock’s trading range for the day when the transactions supposedly occurred.
  - charlesdm 9y ago
    Or he didn't look closely enough into what was happening. He might not have been very capable, just lucky. "Should have known" is not an answer to (potential) incompetence or stupidity. Given his funds went bankrupt, he probably did not know.
    - x0x0 9y ago
      The law seems to take a dim view of sophisticated investors who pretty clearly could have trivially found something fishy and instead chose not to look. Deliberate ignorance apparently gets clawbacks.
mrleiter 9y ago
There is something called "bona fide purchase" [0]. As I am not familiar with US common law, I am not sure it would apply here, but basically: an innocent purchaser (no ill intentions etc...) can purchase stolen goods and become their rightful owner. [0] https://en.wikipedia.org/wiki/Bona_fide_purchaser https://en.wikipedia.org/wiki/Bona_fide_purchaser
- Fnoord 9y ago
  That's for physical goods I guess. Theres also a counter law for that. In Dutch called heling, English Wikipedia page explains it [1] [1] https://en.m.wikipedia.org/wiki/Handling_stolen_goods https://en.m.wikipedia.org/wiki/Handling_stolen_goods
jjeaff 9y ago
In the case of these clawbacks though, they aren't only taking the returns. They are taking it all, to be redistributed evenly. So in this case, even if you got your principle out early, you are probably going to have to share in the loss equally with everyone else when all is said and done.