The Maryland Court of Appeals held that the IRS had priority in collecting taxes due from the sale the assets of the promoter of an illegal pyramid scheme. The court had appointed a receiver to liquidate the assets of the promoter and distribute the proceeds to creditors. The proceeds were not enough to cover the IRS tax lien on the promoter and the investors sued under the theory that the property was theirs and not the property of the promoter. However, since the investment money was co-mingled with money from other legitimate enterprises, the proceeds from the sale could not be traced back to the original investments. It was therefore impossible to tell what money was the property of the investors, if any, and the investor's claim of priority to the proceeds was denied.
Also available at: http://www.mlmlegal.com/legal-cases/Brown_v_Coleman.php
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