The question in Visconsi, of course, was the proper measure of damages and the question here is the proper measure of net equity. But the two questions are in reality the same because they both came down to what is the proper way to measure the amount remaining to an investor in a Ponzi or analogous scheme where the investor put in money, took out more than he put in, but thought he nonetheless had extensive amounts remaining in his account because he received statements showing this was the case due to purported earnings -- due to phantom profits. SIPC and the Trustee say you measure the amount remaining to an investor by an out-of-pocket calculation of the amount the investor put in minus the amount he took out. The Sixth Circuit has ruled that this measure is "wholly without merit", and is "improper and wholly inadequate," because the victim gave the culprit money "not to hide under a rock or lock in a safe, but for the express purpose of investment, with a hope -- indeed a reasonable expectation -- that it would grow." (Emphasis added.)
Respectfully submitted,
Lawrence R. Velvel
as
Amicus Curiae
MassachusettsSchool of Law
500 Federal Street
Andover, MA01810
Tel: (978) 681-0800
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