Description

Investors in Ponzi Schemes that profit from those schemes are often called upon to return those profits after the Ponzi Scheme has collapsed, leaving certain investors who (1) have profited from the Ponzi Scheme;  and (2) those who have lost money in the Ponzi Scheme.  

A trustee in bankruptcy is typically appointed, and the trustee can force the return of profits made by investors from the Ponzi Scheme.  These are “known as a Clawback”.  Profitable investors may also be called upon to return both their “profits and or their principal investments” that were returned to them.       

There is a unique section of the Internal Revenue Code that permits investors who are forced to make a pay back of profits, to be able to go back in time (even after the Statute of Limitations has run) and obtain refunds from closed years that may be much more valuable than a simple theft loss deduction.  Often refunds from the past are more than likely to have been taxed in much higher tax brackets.  These refunds of past profits often provide much higher returns than a simple current deduction.