Clawbacks in Ponzi Schemes: Even "Winners" Aren’t Safe

I’ve always been aware that payments made before a bankruptcy could be subject to clawbacks, but I didn’t realize that investors who profited from a Ponzi scheme—so-called "winners"—could have their earnings reclaimed as well.

A recent CBC article by Karen Larsen (Feb 26, 2025) highlights an important legal precedent:

"Under B.C. law, 'winner' investors in a Ponzi scheme are not entitled to keep their investment proceeds regardless of whether they were aware of the fraud."

It appears the courts have classified these payouts as fraudulent conveyances, meaning even investors who unknowingly benefited from the scheme may be required to return funds. These recovered funds are then redistributed to help compensate the net losers of the fraud.

For further reading on this topic, see this GD Law blog post.