Court Finds Defendants Jointly and Severally Liable for Disgorgement and Prejudgment Interest Award in Ponzi Scheme Case

[authors: Michael S. Gordon, Jason F. Clouser]

The US District Court for the Northern District of New York granted the Securities and Exchange Commission’s motion for entry of final judgment and monetary relief of disgorgement and prejudgment interest against defendants in a case involving violations of securities laws through the operation of a Ponzi scheme. In September 2011, the court granted the SEC’s motion for default judgment as to liability and injunctive relief, and granted leave for the SEC to seek disgorgement, prejudgment interest and civil penalties following resolution of the criminal case then pending against the individual defendant who operated the Ponzi scheme. In seeking an award of $4,557,632 in disgorgement from all defendants, the SEC submitted exhibits detailing defendants’ bank account activity involving investor funds. The court awarded the amount sought, finding that it was a “reasonable approximation of profits causally connected” to the Ponzi scheme. The court also awarded the SEC $645,422 in prejudgment interest and found that the defendants were jointly and severally liable to the SEC for total amount awarded based on evidence of collaboration and commingling of funds by the defendants.

SEC v. Bass, No. 1:10-CV-00606, 2012 WL 5334743 (N.D.N.Y. Oct. 26, 2012).