Need help from someone who's good with investment laws

[The Angriest Bird]

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I'm really sorry for posthing this here because it's nothing related to medical school. I'm an MS3 by the way. My family encountered this problem recently and I have no friends in the law fields. This forum has always been friendly and supportative, so I'm attempting to seek help here.

The Story
My parents recently invested $50K into a "fund." It's a "private" fund if you wish, because it's small (about 70 investors) and it is managed by a guy who's supposed to be an investment genius. Just bear with me for the terms, I really know NOTHING about investment. Last November, my parents didn't want to take the risk anymore, so they withdrew the $50K but let the profit remain in the fund.

Last week, this whole thing turned out to be a fraud. Now The fund has no money to pay back the investors. The crowd is going nuts. My parents went "whew!" But, they were told by other investors that they have to give some of the $50K back to the fund because it was a "recent withdrawal" (within 3 years). We think it's totally bull-**** but they say it's mandated by the law.

I just want to help my parents figure out what's going on. We will definitely hire a lawyer but this problem cannot wait until Monday. Many many thanks for your reply!

 

[Evergrey]

I am ignorant of any such laws, but it sounds like horsesheizzenhoffer to me too.

 

[todbaker37]

This "private" fund no doubt had some sort of contract drawn up between this guys company and your parents. In that contract may be something about such an event happening, the company going under, so they will have to read their contract if they have one to see where they stand. Laws vary by state, but in no state that I am aware of will they make you give back any money taken out that is equal to the amount invested. Your parents are most definitely out of the profits and are lucky to get their original investment back. The members are most likely full of c*ap but like I said you have to check the laws of your state and the contract (assuming your parents have one bc they didn’t invest chump change). The members will most likely be contacting your parents wanting them to join a law suit against this person who fooled all of his investors. Never pay any money to the group. The only way they should pay up is when it is court ordered. In situations like this, if someone feels that your parents did something wrong they will take you to court over that kind of money, and if your parents did do something wrong they will be court ordered to pay. They should not pay just because someone told them they read somewhere that a law says they should. Leave that up to the court. Good luck

 

[The Angriest Bird]

This "private" fund no doubt had some sort of contract drawn up between this guys company and your parents. In that contract may be something about such an event happening, the company going under, so they will have to read their contract if they have one to see where they stand. Laws vary by state, but in no state that I am aware of will they make you give back any money taken out that is equal to the amount invested. Your parents are most definitely out of the profits and are lucky to get their original investment back. The members are most likely full of c*ap but like I said you have to check the laws of your state and the contract (assuming your parents have one bc they didn’t invest chump change). The members will most likely be contacting your parents wanting them to join a law suit against this person who fooled all of his investors. Never pay any money to the group. The only way they should pay up is when it is court ordered. In situations like this, if someone feels that your parents did something wrong they will take you to court over that kind of money, and if your parents did do something wrong they will be court ordered to pay. They should not pay just because someone told them they read somewhere that a law says they should. Leave that up to the court. Good luck

That's pretty much exactly what we are doing now 🙂

 

[todbaker37]

That's pretty much exactly what we are doing now 🙂

Good. It seems that your parents were fooled once, best not to make it twice.

 

[WellWornLad]

But, they were told by other investors that they have to give some of the $50K back to the fund because it was a "recent withdrawal" (within 3 years). We think it's totally bull-**** but they say it's mandated by the law.

You don't have to do anything until your lawyer says you do. You do have a lawyer, right?

And what do you mean by "some" of the money? That seems very arbitrary.

I think there are a lot of unanswered legal questions behind these scams that are popping up now. Much is going to depend on whether this fund actually kept good records of who gave what, and when. If you can't prove that you actually put in $50K you might be in trouble, but unless your parents paid in cash that probably won't be a problem. If they did, well, that's just freaking sketchy.

I feel for you, though. In high school I got to find out that my college fund disappeared in a similar plan that was too good to be true.

This investment genius - his name wouldn't be Stanford, would it?

 

[Pinkertinkle]

Yes there is a possibility you may have to give back some money. So called "claw back" suits will follow such ponzi schemes.

 

[WellWornLad]

Yes there is a possibility you may have to give back some money. So called "claw back" suits will follow such ponzi schemes.

From what I understand, claw-backs usually apply to capital gains; they can only touch the principal if they can prove you knew about the fraud before you took your money out.

 

[Sol Rosenberg]

First: I am not a lawyer, and this is not legal advice.

Second: The only person that you should be listening to is your lawyer, and not a bunch of anonymous people on the Internet.

There is no way to determine who is correct in this situation from the information that you have given. That said, I would not consider paying back one penny unless ordered to by a court, or if my attorney suggested I do so (because the likelihood of being ordered to by a court was very high.)

 

[schwab]

First: I am not a lawyer, and this is not legal advice.

Second: The only person that you should be listening to is your lawyer, and not a bunch of anonymous people on the Internet.

There is no way to determine who is correct in this situation from the information that you have given. That said, I would not consider paying back one penny unless ordered to by a court, or if my attorney suggested I do so (because the likelihood of being ordered to by a court was very high.)

Yes. Yes. Yes. Call a lawyer and don't post about it on the Internets.