The former girlfriend of a local currencies trader who admitted to orchestrating a huge Ponzi scheme must forfeit more than $500,000 in cash and gifts that a bankruptcy judge said she fraudulently received during the scam.
The judgment issued June 3 against Pamela Morgan is a significant court victory for bankruptcy officials who have been chasing the money trail for more than two years in a effort to recover the funds Chattanooga-based foreign currencies trader Luis Rivas stole.
Some 500 investors across the country who thought they'd be getting rich in the foreign currencies market collectively lost close to $30 million in Mr. Rivas' classic Ponzi scheme.
He pleaded guilty to fraud last year in U.S. District Court in Chattanooga and currently is serving a federal prison sentence. Authorities caught him on the run in Kansas in the summer of 2008. At the time an involuntary bankruptcy proceeding against Mr. Rivas already was under way to try to recover as much money as possible and minimize damage to investors.
Ms. Morgan was only one of several people that bankruptcy trustee Grey Steed sued in the bankruptcy proceeding against Mr. Rivas.
Ms. Morgan had fought against forfeiting the money and gifts, but evidence showed that Mr. Rivas in one instance gave her $225,000 in cash after the bankruptcy proceeding had been filed. Such actions are known as "post-petition transfers" and are prohibited according to bankruptcy law.
See tomorrow's Times Free Press for complete details.