Ponzi, Property, and Luck
32 Pages Posted: 24 Oct 2014
Date Written: October 13, 2014
Recent decisions allocating losses between fraud victims in the aftermath of Ponzi schemes offer a real-time illustration of Holmes’s “law reform by ignorance.” Problems in victim v. victim restitution that were once resolved by the application of equitable property rules are being decided by lawyers and judges who never learned the rules. Unable to apply what Holmes called “special knowledge,” they have had to rely instead on “general principles” — and they have decided the cases differently. The result has been to readjust the limits of property rights along a neglected dimension: the extent to which ownership is protected against involuntary dispossession. This article traces the different points at which property baselines have been redrawn, considers the effects, and inquires what “general principles” might account for the change.
Keywords: restitution and unjust enrichment, property, fraud, loss-sharing, luck, Ponzi, equity
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