Equitable receivers enjoy tremendous powers which allow them to manage the affairs of the receivership estate efficiently and effectively when compared to other alternatives such as bankruptcy. In addition, a receivership can be used as a means of tracking down, marshalling and liquidating assets (including causes of action) to maximize the overall return to investors.

The ability to address, in a single action, the claims against multiple defendants, including their related assets and entities, results in tremendous judicial and administrative efficiency, significantly reducing the demands on the time of the court and increasing assets left for distribution to investors and trade creditors, and permitting a court which is familiar with the multi-faceted facts of the case to reach consistent conclusions.53 This is particularly important in the setting of financial fraud such as Ponzi schemes, with its normal scenario of multiple defendants, plus potentially culpable marketers, financial institutions, attorneys and accountants.

The tremendous flexibility granted the receivership court in a federal equitable receivership is particularly valuable in this setting of the S.E.C.-initiated receivership. The power of the receiver to bring actions before the receivership court, no matter where the affected assets or the opposite parties may be located, is critical in the typical Ponzi-Pyramid or other securities fraud setting, where assets are frequently located (and in many instances concealed) throughout the country as well as overseas. The “stay” powers of the receivership court are of critical importance as the receiver seeks to sift through the complicated affairs of the various receivership entities, as well as to avoid bleeding off the assets of the receivership estate through addressing and defending against multiple (and often conflicting) third-party actions. The ability to address claims of investors and trade creditors, as well as claims that the receiver may assert against third parties, through summary procedures still protects the claimants (or those against whom claims are being asserted) through insistence on fundamental due process rights, but permits a more rapid and less expense conduct of the resolution process. And resolving these claims before a single court permits greater equity and consistency in addressing the frequently conflicting claims of trade creditors and investors (particularly since in such actions, available assets will prove less than verifiable claims).

Finally, this flexibility is of particular value in addressing the complexities of the typical Ponzi-Pyramid marketing scheme in determining how assets should be distributed. Each of these cases is unique and presents complex equitable considerations. The discretion granted the court in arriving at a fair distribution plan permits it to address those complexities and to develop a plan that achieves reasonable fairness for those injured in this particular scheme


53 Compare this with the far less satisfactory results that would be achieved if the matter were addressed through the bankruptcy courts: see Chapter 10 of this Receivership Sourcebook.