The Expert Podcast

So what happens if you're a victim of a fraud or scam or Ponzi scheme and the scammer or fraudster doesn't have all your money? What happens if you send money to some Bitcoin scam or some cryptocurrency scam and they took your money and it's not in the account anymore—where else can you get money from? We're going to take a look at the U.S. Department of Justice asset forfeiture guide and see what your options are as a victim. Remember, we're not attorneys, we're not giving you legal advice—this is just an overview of what we've seen in other fraud cases.

This is from the U.S. Department of Justice Money Laundering and Asset Recovery Section. So this is exactly what they do for a living—they look to recover assets on behalf of victims, and they have a guide for this. This is their statutes. It's about a 300-page document. We're going to jump right to the section on how to recover assets and get replacement assets if you're the victim of a scam, and we're going to start with this section right here—it's under 21 U.S. Code 853 Criminal Forfeitures.

Property subject to criminal forfeiture—any person convicted of a violation is punishable by imprisonment and also shall forfeit any property constituting or derived from the proceeds from the violation. So if somebody is a scammer and they obtain proceeds from that scam, that's subject to forfeiture—any of the property used to commit the forfeiture.

So here's a good example: if somebody has an office building and they use that office to commit the scam—even if that office wasn't obtained from the scam—if it was used in the scam, then in theory the government could forfeit that asset.

What about property that's transferred to somebody else? Well, third-party transfers are covered right here. Any property that is subsequently transferred to a person other than a defendant may be subject to forfeiture and ordered forfeited as part of the crime—unless the person can show that it was for a specific purpose.

We've seen some cases—the Scott Rothstein case in Florida—where Scott Rothstein, who is a disbarred attorney who ran a large Ponzi scheme, purchased a lot of jewelry from a watch company, and that watch company was ordered to return the money that they received because it was a proceed of the fraud and the scam. So third parties can be liable for this.

And really, now it extends to any other property. If a person is convicted of this scam, they are subject to forfeiture of all their property unless it was acquired outside the period of the violation and there was no likely source for the property other than the violation.

So the government can do what's called a substitution. If a person who's a scammer has squandered all of the money that they took from victims, they can replace that with other assets—even if those assets were not a result of the scam. This has been done many times.

So let's say a person has a million-dollar house, and then they go into being a scammer, being a Ponzi schemer, and they steal a million dollars from victims—but they spend that million. They go on vacations, dinners, trips, clothing, jewelry, whatever—so that money's gone.

When the government looks to recover that money for victims, if that money's gone, they can replace it with other assets owned by the scammer. And that's covered in this section right here: substitute property. In any case, the court shall order the forfeiture of any other property up to the value of any property described in A through E. So if the property that is a result of the scam is not available, they can substitute property.

They can also forfeit on the civil side all raw materials, products, equipment for use in manufacturing or using for the scam—or in this case narcotics—all property used as a container, and all conveyances: aircraft, vehicles, vessels.

So if the scammer is using other resources to extend or continue their fraud, those can be forfeited as well. So if you're the victim of a scam, this is what the government can do—and a lot of times, you can use these on the civil side to replace the lost assets that have been taken from you either under false pretense, by fraud, by Ponzi scheme, or some other—maybe an unregistered security.

So remember, recovering assets that were lost in a scam or fraud has many avenues—third parties may be liable, replacement assets, substitute assets, or even assets that were used by the scammer to take your money.