Did this ever happen before or is this unprecedented?
https://news.bloomberglaw.com/bankr...-must-return-profits-in-clawback-2d-cir-rules
https://news.bloomberglaw.com/bankr...-must-return-profits-in-clawback-2d-cir-rules
Madoff clients to return profits
- Thread starter qlai
- Start date
Although this is a little different - the answer is unfortunately - yes.
I did some trades 5+ years ago in Sears and in their respective rights offering. I've done nothing wrong (non insider) but I did profit from these transactions and the profit had nothing to do with fraud that I was aware of. I was simply buying/selling stock/options/rights (arb trading) but because I held positions then I could be liable for Lampert's fraud. Crazy stuff.
Here is the email I received recently from IB:
Interactive Brokers LLC was served with a subpoena by the Official Committee of Unsecured Creditors of Sears Holding Corporation (“Creditors’ Committee”), related to the pending adversary proceeding captioned Sears Holdings Corp., et al. v. Lampert, et al., Case No. 19-08250 (RDD) (Bankr. S.D.N.Y.) in the United States Bankruptcy Court for the Southern District of New York. The Creditors’ Committee is seeking to recover money for the bankruptcy trust for the creditors of Sears Holdings.
Specifically, the Trustee seeks to identify non-insider shareholders of Sears Holdings who held shares at the time of, and thus benefited from, two transactions that are at issue in the pending Adversary Proceeding: (1) the Lands’ End Spin-Off and (2) the Seritage Rights Offering. Plaintiffs in the Adversary Proceeding intend to file one or more new complaints against certain of these non-insider shareholders asserting claims for fraudulent transfer in connection with these two transactions of the Debtors’ estates. It is likely that Plaintiffs will only assert claims against defendants (or affiliated groups of defendants) that received transfers worth in excess of $250,000.
The subpoena served on Interactive Brokers seeks to discover the names of any Interactive Brokers customer that received shares of Lands’ End or subscription rights of Seritage in order to potentially add them to the lawsuit. The subpoena also asks for the addresses, phones numbers, and number of shares or rights received for each of the customers identified.
IBKR is legally required to respond to lawful subpoenas and provide to the Creditors’ Committee the information sought in the subpoena. Trading in your account U******* falls within the ambit of the subpoena. Therefore, Interactive Brokers is providing you with notice that we will be producing information concerning you and your account to the Trustee pursuant to the subpoena.
Please direct any questions you may have on this matter via the Message Center located within the Support menu of your Client Portal. Interactive Brokers cannot provide legal advice to you regarding this matter.
Interactive Brokers Client Services
Kinda sucks.
If you're smart/lucky enough to capitalize on a trading situation (even when it didn't involve insider info or front-running), you might not get to keep your profits.
Though in Madoff's case... involved fraud. No surprise about the claw-back.
not uncommon to go after fraudulent insiders and those who helped insiders. ie Civil lawsuits against Worldcom, Bre-X and Enron went after the insiders and the banks that were recommending the purchase of shares. I have not seen any successful attempt of "non insiders" going after "non insiders" who sold these shares prior to their collapse.
In the case of Bre-X. A gold company that claimed to have X reserves of gold and they had none. A complete fraud. However many non insider shareholders bought and then sold shares and made large profits (even though the company didn't really exist). No one had to return profits.
But maybe times are changing.....
Cases like Enron get more complicated because Enron had a rather vast network of legitimate business assets in production, distribution, and generation for Natural Gas and Electricity.