Famed Law Firm Greenberg Traurig Agrees to Settle Suit Arising from Ponzi Scheme

by Mike Mintz on July 16, 2012 · 2 comments

in Legal News and Trends,martindale.com

The world-renown law firm Greenberg Traurig, LLP recently agreed to pay a whopping $61 million to settle a suit brought in the District Court of Arizona.  The suit alleged that Greenberg Traurig aided an alleged Ponzi scheme that ultimately bankrupted two companies and lead to almost $1 billion in losses.  See Facciola et al. v. Greenberg Traurig, No. 10-1025, D. Ariz. 2012).  Another firm, Quarles & Brady LLP was also granted preliminary approval by the court of its much smaller $26.5 million settlement on similar claims in the suit.

According to the plaintiff, Mortgages Ltd. created a Ponzi scheme in order to hide its insolvency and stay in business.  The scheme involved finding investors to buy into another firm called Radical Bunny, LLC which provided funds to conceal Mortgages’ massive debt load.  Some time after the scheme was initiated, both Mortgages and Radical Bunny filed for bankruptcy.  Greenberg Traurig were the attorneys for Mortgages, and Quarles & Brady represented Radical Bunny.

According to plaintiffs’ allegations, both law firms created a misleading “façade of legitimacy” through their representation of the companies, which enabled the implementation of the Ponzi scheme and the continuing sales of illegal securities to unwitting investors.

There were two classes in Greenberg Traurig’s settlement: the Mortgages class, which included almost 1,000 investors who invested $600 million, and the Radical Bunny class which included almost 800 individuals who invested close to $200 million in the scheme. The Quarles & Brady class also consisted of a Mortgages class and a Radical Bunny class.

{ 2 comments… read them below or add one }

Sorrentino Bill wrote onAugust 23, 2012 at 8:11 pm

Reminds me greatly of the Oxymoron Entertainment – Epassporte Situation. Technically it may be a ponzi scheme, and the CEO Christopher Mallick controls all of the companies involved.

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Steven J Fromm wrote onJuly 19, 2012 at 2:23 pm

This is very scary stuff both from a lawyer perspective and from an investor perspective. You do not give a date, so I wonder whether these shenanigans occurred before or after the Madoff debacle. From a tax perspective remember there are special rules procedures for these type of theft losses.

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