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Ever since Bernie Madoff’s Ponzi scheme collapsed in 2008, it’s been much-rumored that investors included tax dodgers shielding money from the IRS, drug dealers who laundered proceeds through the con man and wealthy moguls hiding assets from ex-spouses, Bloomberg News reported today. The scheme wiped out $20 billion of investors’ money, but the victims’ claims for repayment total just $17.5 billion. Almost half of the unclaimed money can be traced to a couple of Caribbean-based hedge funds. Their reasons for abandoning their $1.2 billion of claims, while unknown, may have amounted to a calculated decision that any recovery would be tiny compared with what they might be forced to give back if they got tangled up in U.S. courts, according to lawyers familiar with the recovery process. As for the remaining $1.3 billion in unclaimed money, experts are left to ponder. Unlike the two funds, these are likely individual investors who had a variety of reasons to shy away from the claims process, especially at a time when victims were expecting to recover only 4 or 5 cents on the dollar, legal experts say. Read more. 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

The Supreme Court will hear oral argument tomorrow in Husky International Electronics, Inc. v. Ritz, No. 15-145. The issue in the case is whether the “actual fraud” bar to discharge under Section 523(a)(2)(A) of the Bankruptcy Code applies only when the debtor has made a false representation, or whether the bar also applies when the debtor has deliberately obtained money through a fraudulent-transfer scheme that was actually intended to cheat a creditor.

The U.S. imposed a $4 million civil money penalty on a Florida private bank for anti-money laundering compliance failures, including delays in filing reports relating to a $1.2 billion Ponzi scheme run by jailed attorney Scott Rothstein, the Wall Street Journal reported today. Coral Gables, Fla.-based Gibraltar Private Bank and Trust Co.’s “substantial” anti-money laundering compliance program deficiencies led to its failure to monitor and detect suspicious activity despite red flags, according to a statement from the U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN. The deficiencies caused Gibraltar to fail to file on a timely basis at least 120 suspicious activity reports involving nearly $558 million in transactions between 2009 and 2013, much of which related to Rothstein’s Ponzi scheme, for which he was convicted in 2010 and sentenced to 50 years in prison. Read more. (Subscription required.) 

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case. 

The official in charge of recovering funds from Bernard Madoff's Ponzi scheme said that he has new evidence that accountant Steven Mendelow played an instrumental role in growing and concealing the massive fraud, profiting in the process, Dow Jones Daily Bankruptcy Review reported today. Lawyers for trustee Irving Picard at a hearing yesterday asked Judge Stuart Bernstein to let him amend a $20 million lawsuit against Mendelow to reflect new allegations that he knew Madoff wasn't making the stock trades and enormous profits he peddled to his investors. In return for funneling new investors into his brokerage firm, Madoff guaranteed "special financial benefits," including a 17 percent return on some of Mendelow's accounts, Picard's lawyer said yesterday. Read more. (Subscription required.)

How do lawyers and forensic accountants define roles in a fraud case? Explore on today's abiLIVE webinar! Register here.

For a further analysis of commercial fraud, make sure to pick up a copy of ABI’s Fraud and Forensics: Piercing Through the Deception in a Commercial Fraud Case.