Ever wonder whether you will have access to funds derived from your former spouse's Ponzi scheme? One woman from New York did, but the woman's divorce occurred before the husband's federal fraud investigation began. Clearly whether money derived from a Ponzi scheme could be divided during property division is not a common concern among divorcing couples in Texas or elsewhere. But, recent economic times may make it more common than it has been before.
In 2007 the woman and her husband divorced, and the divorce settlement assigned the husband to pay the woman $12.5 million every two years through 2020. The husband agreed to keep $5 million and condominiums in Florida and New York. In 2009, the husband was accused by federal prosecutors of running a 13-year Ponzi scheme.
The fraud charges against the husband led to $7.5 million of the woman's assets being frozen in August 2009. The frozen assets allegedly stemmed from the former husband's Ponzi scheme. In June 2011, the highest state court in New York, the Court of Appeals, ruled that fraud proceeds can constitute marital property. In its explanation the court said former spouses are "free to move on with their lives" after the conclusion of divorce and property division.
The Court of Appeals decision was applied in federal court and the federal court ruled the frozen assets could no longer be held.
The lawyer for the woman was "cautiously optimistic" about the outcome of the case and said the involved federal agencies may try to negate the divorce settlement by showing that the divorce agreement did not fairly and equitably divide marital assets.
Source: Reuters, "Ex-wife may recover assets tied to Ponzi scheme: court," Jonathan Stempel, Sept. 15, 2011