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If an investment firm receives stolen funds, and then pays you a dividend with those funds, are you a knowing accomplice?

Santa Monica, CA |

I was recently invited to join a well-performing venture firm - only to learn later that various criminals were effectively washing their ill-gotten gains by investing with the firm. When receiving any dividends, or even my investment back, it is may fear that some of these funds were co-mingled with my investments. How do I proceed to tactfully exit my position but not become ensnared in the impending/likely litigation.

Attorney Answers 3

Posted

You get a really, really good attorney to represent you alone. This is not "public" "post on the internet" kind of problem. Get all your paperwork together immediately and contact a lawyer before the weekend. Suspicions and proof may be different, but prudence and being proactive are the intelligent approach.

The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.

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9 comments

Asker

Posted

So it's possible to pull out tactfully? Or should I just assume the money is gone.

Michael Charles Doland

Michael Charles Doland

Posted

Respectfully, the issue is not tact. The issue is avoidng liability, criminal and civil depending on your job description and activities.

Asker

Posted

I'm just an investor, not management.

Christine C McCall

Christine C McCall

Posted

Mr. Doland: One of the highest and best professional services that the the attorneys who participate here on the Avvo Q and A service can provide, in my view, is the identification of matters that are not suitable for discussion, analysis, or resolution by the snippets of general advice and information that can be exchanged in this format, and the willingness to take that position --often at the asker's fulsome displeasure. You are really gifted and accomplished in this particular skill. This response to this post is Exhibit A and proof positive. You have my personal and professional regard and admiration for your skill in this. It isn't easy, I know.

Asker

Posted

What I is a general plan of action. Once I know my prerogative and who can help me exude that presence, I will move forward in acquiring legal counsel (most likely from the parties in this discussion). That said, I have checked the "you can call me" box, giving my name and number to Avvo. If you can discuss my situation and let me know how your expertise and services can lead to an acceptable conclusion, I am eager to initiate that conversation.

Michael Charles Doland

Michael Charles Doland

Posted

1) Ms. McCalll, the acknowledged Avvo expert on administrative law is too generous. I most respectfully thank you. 2) After my 9am appointmient, now 20 minutes late, I shall phone. Respectfully,

Asker

Posted

I personally think both of you are awesome. I'm sure a little clarity will bring me a path forward.

Asker

Posted

Talked to Michael Charles Doland on the phone. Good conversation. I will make sure to leave reviews with a level of affability based on the influence of the advice given - which at this point looks favorable.

Michael Charles Doland

Michael Charles Doland

Posted

Thank you very much. Sincere best wishes on a non-litigation resolution.

Posted

Happy to assist further. Much will depend on how the federal authorities deal with the criminals and the firm. If the firm is merely sued for restitution, I somehow doubt (although it could based on the LP/LLC agreement for the v/c fund) it would seek contribution from investors. But if there is a receiver involved that is gathering assets of the criminals, or if the firm and/or criminals declare bankruptcy, you would likely be looking at a "claw back" action of some kind.

When you say exit your "position," I surmise that means liquidating your holdings as opposed to leaving your job. Given what you've said, there is a Hobson's Choice. Seek to redeem and federal authorities may say you know what was going on. Don't redeem and your money is frozen for several years (that's more that two -- ask anyone involved with Stanford Financial).

And if you haven't left, I would think it's a good time to do so. You may also need someone with knowledge of the hedge fund world to review your employment agreement. Even severance could be the subject of recovery efforts by others.

The foregoing is not legal advice nor is it in any manner whatsoever meant to create or impute an attorney/client relationship.

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3 comments

Asker

Posted

I am not employed by the firm, just an investor.

Robert V Cornish Jr.

Robert V Cornish Jr.

Posted

That's good news. Let me know if I can be of any assistance.

Brett Gregory Evans

Brett Gregory Evans

Posted

I couldn't agree more with my colleagues. You definitely need to seek out competent securities counsel. But as Mr. Cornish points out, when considering the question of exiting your "position," not only are you stuck with the implications of knowledge, but another associated issue (see Madoff) - the potential to be drug into litigation in if the investment goes bankrupt with a trustee taking over, as opposed to a receiver. As in Madoff and several other smaller actions (relative to Madoff, mind you) is the potential to be brought into the bankruptcy action under a theory of fraudulent conveyance/transfer.

Posted

First, I agree with the advice that you immediately retain qualified counsel to advise you in this situation and that you do not disclose anything else about this to anyone other than your lawyer.

Second, I find your question a bit confusing, in that you indicate that you made an investment with this firm, but it also sounds like you may have an employment or partnership position in the firm. If you are merely an investor, then the key will be to withdraw your investment as quickly as possible and take precautions necessary to avoid potential clawbacks if the firm is later subjected to claims by other investors and/or the government.

If you are also an employee or partner who has knowledge of illegal conduct by this firm, that is a completely different situation. You may be in a position to be an SEC whistleblower, which would potentially provide you immunity from prosecution and potentially provide financial rewards if the government is successful in prosecuting this firm and its principals.

If you fall into the whistleblower situation, I urge you to contact a firm that is experienced in representing both investors and whistleblowers. My firm is experienced in both of these areas and we'd be glad to consult with you on this matter.

Legal Information is Not Legal Advice My answer provides information about the law based on the limited information provided in the questions asked and is not intended to provide legal advice or opinions, and does not constitute an attorney-client relationship. The answer to the question is for educational and informational purposes only. The law differs in each jurisdiction and may be interpreted or applied differently depending on the jurisdiction or situation. Accordingly, I highly recommend that you consult with an attorney to discuss the details of your problem so you can get legal advice tailored to your particular circumstances.

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1 comment

Asker

Posted

Eric, I see you tried to call me, but we were unable to connect. Given your high rating in the community, I would like to hear your opinion as well. Because Michael Charles Doland is in California, I will probably be advised to continue with him if needed, but I am eager to see what options exist.

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