June 1, 2020 – Isaiah v. JPMorgan Chase Bank, N.A., 960 F.3d 1296 (11th Cir.)

On June 1, 2020, the U.S. Court of Appeals for the 11th Circuit issued Isaiah v. JPMorgan Chase Bank, N.A., a precedential opinion that draws sharp limits on court-appointed receivers’ ability to bring claims against financial institutions that provided banking services to customers later discovered to be running a Ponzi scheme.

As the economy transitions from its nearly decade-long bull run to a swift and unanticipated recession, Ponzi schemes previously kept afloat by investments of new money are likely to collapse as investors seek to withdraw their principal. When these schemes collapse, investors often sue the companies created by the fraudsters in an attempt to recoup their investments. Because these companies are often nothing more than sham fronts with no assets of their own, state courts appoint receivers and empower them to bring litigation to marshal the companies’ assets to satisfy judgments for creditors. These receivers, in turn, frequently bring claims against the banks utilized by the fraudsters. Such lawsuits present significant exposure for financial institutions, as large-scale Ponzi schemes can involve the movement of tens or even hundreds of millions of dollars through bank accounts set up by the schemers.
Continue Reading… 11th Circuit Curtails Receivers’ Ability to Bring Ponzi Scheme-Related Claims Against Banks