California real estate mogul Kenneth Casey swindled more than 1,300 investors out of hundreds of millions of dollars in a Ponzi scheme. Now his victims are taking control in a Chapter 11 so collaborative it has veteran bankruptcy attorneys stunned.
“It’s been a process that I’ve never seen before,” said Michael I. Goldberg of Akerman LLP, who specializes in Ponzi schemes and is involved in the case. “The victims here really are sort of amazing.”
The scheme, which didn’t come to light until Casey’s death in May 2020, sparked a Chapter 11 case when seven defrauded investors forced one of Casey’s companies into involuntary bankruptcy. An affiliate filed voluntarily ten days later, and eventually dozens of related entities’ bankruptcy cases were consolidated.
On Thursday, the U.S. Bankruptcy Court for the Northern District of California will consider a “single pot” bankruptcy plan that would pool all assets and distribute proceeds equally among victims, regardless of the type of investment made.
Creditors in bankruptcy often square off against each other to get as much as they can from limited assets. In this case, the investors coordinated early on and decided that they’d all benefit more by working together.
Their initiatives provide a template in other bankruptcies involving crime victims, bankruptcy professionals said. One law firm already has adopted the investors’ methods to change its engagement with abuse survivors in the Boy Scouts of…