Bankruptcy can provide creditors and victims of fraud with money they may otherwise never see again.
A lawsuit was recently filed in federal bankruptcy court against Chicago-based BMO Harris Bank. The bankruptcy trustee, who is recovering money for the victims of a ponzi scheme, in a business bankruptcy filed the lawsuit. The Minnesota businessman behind the scheme is currently in prison. M & I Bank, owned by BMO Harris Bank, is accused of aiding and abetting the fraud. The bank is accused of turning a blind eye to the $35 million that passed through the bank account the imprisoned businessman used to finance the $3.65 billion ponzi scheme over five years. The deposits into the account were allegedly “astronomical” and the lawsuit further alleges that the bank was never given a valid business reason for the deposits. The lawsuit seeks in excess of $50,000 in damages.
The federal bankruptcy process, and the assignment of a bankruptcy trustee, may help recover money that has been fraudulently obtained. In a business bankruptcy, it may be possible for creditors or victims of fraud to recover funds otherwise lost to them. In a reorganization bankruptcy, creditors have some say over the reorganization plan which is intended to return the struggling company to profitability.
Reorganization places creditors in different categories. State and federal tax agencies, employees who are owed wages and stockholder interests are each placed in their own class. Also placed in their own class are creditors with secured interests. Unsecured creditors are placed in one class. The plan may alter the repayment to these creditors which is why all must vote and approve the plan.
Business bankruptcy can provide recovery in cases where it might not have otherwise been possible. This can benefit creditors and victims of fraud.
Source: WHBFTV4News, “Petters bankruptcy case trustee sues BMO Harris,” Nov. 14, 2012
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Illinois bank sued in bankruptcy court