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Monday
Dec032012

Civil Prosecution of Ponzi Schemer That Committed Suicide Pays Off As Investors Set to Receive $9 Million

When a New York man suspected of masterminding a $35 million oil-and-gas Ponzi scheme committed suicide in 2010, authorities were forced to drop pending criminal charges.  However, after the United States Attorney's Office continued with a civil prosecution focused on recovering assets tied to the scheme, victims are now set to receive approximately $9 million in funds recovered from that effort.  

According to authorities, Ashvin Zaveri operated a Ponzi scheme from April 2003 to March 2009 that, while purporting to offer lucrative returns from investments in oil and gas partnerships, collected over $35 million from investors that was largely used to pay fictitious returns and sustain Zaveri's extravagant lifestyle.  In December 2009, a federal grand jury indicted Zaveri on sixteen criminal charges including mail fraud, wire fraud and money laundering.  Less than a year later, while the criminal prosecution was still pending, Zaveri killed himself.

After Zaveri's death, the ongoing criminal prosecution ended.  However, authorities continued to pursue the civil recovery of assets that were traceable to proceeds of the fraud.  According to United States Attorney William Hochul, this included the pursuit of a civil forfeiture action, as well as the proceeds of two life insurance policies and the balance in a bank account controlled by Zaveri.  These efforts proved successful, as approximately $9 million was recovered that authorities were able to trace to Zaveri's fraud.

The announcement by the Federal Bureau of Investigation indicates that the United States Department of Justice Asset Forfeiture and Money Laundering Section ("AFMLS") will be in charge of returning funds to victims, likely through a process known as remission.  This process operates similar to that run by a court-appointed receiver, in which victims submit claims setting forth their claimed losses and which are either approved, approved in part, or denied.  Once the claims have been determined, a distribution will likely occur.  While further details were not provided, the AFMLS homepage is located here.

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