Apparently, anyone who invests in a US fund (hedge fund, mutual fund, closed-end fund etc) which later turns out to be a fraud, can not only lose the money they have in the fund, but they can be sued for money they took out years before the fraud was discovered - - both profits *and* principal*.
Effectively what this means is that any investment in any fund in the USA, creates a multi-year liability equal to 100% of the sums withdrawn. There is no way to eliminate this risk. This means that any amount of money you withdrawn from any fund, can never be spent until either the fund is liquidated and all funds returned (thus proving no fraud took place), or the statute of limitations runs out (assuming there is one in this case).
Due to this totally unavoidable liability, I wonder how can anyone justify having a single dollar invested with any US investment fund, hedge fund, or mutual fund. You could withdraw your money, then years later be bankrupted by a lawsuit asking for all the money - profits and principal - to be returned...even though you may have spent that money on essentials such as your mortgage or food and clothing, or you may have paid it in tax or given it away to charity.
It is in effect identical to suing a shopkeeper because a thief used stolen money to buy goods in the store many years ago. That is not viewed as a justifiable clawback, for the simple reason that the shopkeeper was unaware and took the money in good faith, and to institute clawbacks would make *all* monetary transactions too risky to engage in. Exactly the same applies in the case of investment funds, but the US legal system is currently ignoring this fact.
After the Madoff fraud clawbacks start, and retired individuals and charities who have already lost 90% of their net worth subsequently get bankrupted and made homeless by the government pursuing this crazy law, I wonder whether the authorities will change their tune. Some of these victims will commit suicide or go to jail rather than pay back that money.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kFmYaaw5sY&refer=home
Effectively what this means is that any investment in any fund in the USA, creates a multi-year liability equal to 100% of the sums withdrawn. There is no way to eliminate this risk. This means that any amount of money you withdrawn from any fund, can never be spent until either the fund is liquidated and all funds returned (thus proving no fraud took place), or the statute of limitations runs out (assuming there is one in this case).
Due to this totally unavoidable liability, I wonder how can anyone justify having a single dollar invested with any US investment fund, hedge fund, or mutual fund. You could withdraw your money, then years later be bankrupted by a lawsuit asking for all the money - profits and principal - to be returned...even though you may have spent that money on essentials such as your mortgage or food and clothing, or you may have paid it in tax or given it away to charity.
It is in effect identical to suing a shopkeeper because a thief used stolen money to buy goods in the store many years ago. That is not viewed as a justifiable clawback, for the simple reason that the shopkeeper was unaware and took the money in good faith, and to institute clawbacks would make *all* monetary transactions too risky to engage in. Exactly the same applies in the case of investment funds, but the US legal system is currently ignoring this fact.
After the Madoff fraud clawbacks start, and retired individuals and charities who have already lost 90% of their net worth subsequently get bankrupted and made homeless by the government pursuing this crazy law, I wonder whether the authorities will change their tune. Some of these victims will commit suicide or go to jail rather than pay back that money.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kFmYaaw5sY&refer=home
