Politics & Regulation Tax & Legal

Ponzi scheme liability challenged in courts


A recent appeals decision in New York highlights the difficulty for investors taking legal action against investment advisors recommending allocations to what turn out to be Ponzi schemes.

The 14 July decision in the South Cherry Street LLC v. Hennessee Group found that an investment advisor who recommends investment in a fund that later turns out to be a Ponzi can not be held liable for securities fraud unless the investor alleges particular facts that infer that the advisor either had fraudulent intent or acted with "conscious recklessness" as to truth or falsity of