A “Ponzi scheme” is an important type of financial fraud. A Ponzi scheme is a pyramid scheme under which a high rate of return is promised to investors; early investors are paid with funds received from later investors; and there is no underlying investment fund. Bernard Madoff is infamous because he perpetrated the largest Ponzi scheme and financial fraud in American history. Ponzi schemes are common, and persons from every walk of life have been victimized by Ponzi schemes. By the time a Ponzi scheme comes to the attention of law enforcement the perpetrator of a Ponzi scheme usually has run out of money to finance the fraudulent scheme.

One means of trying to recoup the losses for the defrauded investors of a Ponzi scheme is commencing a lawsuit for aiding and abetting fraud against a professional who had actual knowledge of the Ponzi scheme and rendered substantial assistance to the effectuation of the Ponzi scheme. Under an aiding and abetting fraud lawsuit, a professional, such as an accountant or an attorney, can be held liable for assisting a client in perpetrating a Ponzi scheme. In New York a plaintiff alleging a cause of action for aiding and abetting fraud must allege the existence of the underlying fraud, actual knowledge of the underlying fraud, and substantial assistance in the perpetration of the fraud.1

CPLR 3016(b)

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