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Tuesday, June 18, 2024 | Back issues
Courthouse News Service Courthouse News Service

Minnesota Inherits Petters Ponzi Fallout

MANHATTAN (CN) - J.P. Morgan Chase and other major banks accused of helping Thomas Petters pull of a $3.7 billion Ponzi scheme - the third-largest in U.S. history - will fend off a federal lawsuit in Minnesota where the disgraced businessman was once on the docket.

It was nearly five years ago that a federal judge in St. Paul sentenced Petters to spend 50 years in a federal prison in Leavenworth, Kan., for the fraud .

Early this year, a group of hedge funds led by Ritchie Capital Management LLC sued banks around the country to recover $189 million that they claimed to have lost on the scheme.

Their case was transferred to the Southern District of New York, where the hedge funds hoped to hold the banks liable under New York Debtor and Creditor Law.

While U.S. District Judge Lorna Schofield refused to kick the case back to New York County Supreme Court, she ruled on Monday that the District of Minnesota would be a more appropriate venue for the civil case.

"The District Court of Minnesota has so far ruled in at least two cases involving Plaintiffs and arising out of the same core of facts alleged here," the 16-page opinion states. "Cases arising out of those very facts also remain pending in the bankruptcy court in that district. Further, there exists a real danger that conflicting findings may emerge across the various courts where Ritchie is litigating the fallout of Petters' alleged frauds... The interests of justice will be best served by transferring this case to a court that already has familiarity with the underlying disputes."

Neither party's attorneys have returned requests for comment.

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