The Ponzi Book Cited for Discussion on Ponzi Scheme Factors

Posted by Kathy Bazoian Phelps

The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes is proving useful to both practitioners and courts on a myriad of issues relating to the unwinding of Ponzi schemes. The Ponzi Book was recently cited by the United States Bankruptcy Court for the District of New Mexico in In re Vaughn, 2012 Bankr. LEXIS 3581 (Bankr. D.N.M. Aug. 2, 2012). The Vaughn court stated: “For a compilation of factors courts consider to determine whether a Ponzi scheme exists, see Kathy Bazoian Phelps and Hon. Steven Rhodes, The Ponzi Scheme [sic] Book: A Legal Resource for Unraveling Ponzi Schemes, § 2.03[1][b] (2012).”

The compilation of factors used to establish the existence of a Ponzi scheme is, of course, very important  in connection with establishing actual intent to hinder, delay and defraud creditors in a fraudulent transfer claim under section 548(a)(1)(A) of the Bankruptcy Code. With proof of a Ponzi scheme comes a conclusive presumption of actual intent, known as the Ponzi scheme presumption, for transfers made during the Ponzi scheme. See, e.g., Johnson v. Neilson (In re Slatkin), 525 F.3d 805, 814 (9th Cir. 2008); SEC v. Res. Dev. Int’l, LLC, 487 F.3d 295, 301 (5th Cir. 2007); Picard v. Madoff (In re Bernard L. Madoff Inv. Sec. LLC), 2011 Bankr. LEXIS 3578, at *15 (Bankr. S.D.N.Y. Sept. 22, 2011).