Ponzi Scheme Victims Receive 4 Cents on the Dollar from Lou Pearlman Following His Bankruptcy

Ponzi Scheme Victims Receive 4 Cents on the Dollar from Lou Pearlman Following His Bankruptcy

Lou Pearlman may be known by many as the creator of teen sensation boy bands ‘N Sync and the Backstreet Boys, but to thousands of mom-and-pop investors, he will forever be known as the Ponzi schemer who scammed them out of millions. What’s worse, bankruptcy trustee Soneet Kapila recently made public that, following a liquidation settlement of the former producer’s assets, Ponzi scheme victims will receive an initial payout of no more than 4 cents on the dollar.

Pearlman is currently serving a 25-year prison sentence for devising a Ponzi scheme that cheated investors out of more than $300 million. Since Pearlman’s conviction and his petition for bankruptcy law protection in 2007, Kapila has recovered roughly $35 million from asset sales, royalty payments, and lawsuit settlements. However, the bulk of this amount will be extended to secured creditors. According to the settlement plan Kapila filed with the U.S. Bankruptcy Court in Orlando, roughly $25 million of the recovered amount will go toward secured creditors and to cover attorney’s fees.

The remaining $10 million will be divided among unsecured creditors – who lost roughly $260 million. This could amount to a payout of roughly $4,000 for a $100,000 loss, the Tampa Bay Times reports. A committee of unsecured creditors is urging the victims to accept the terms, stressing that fighting the plan could result in further delays in the six-year-long struggle. Kapila also defended the settlement, arguing that, were it not for the banks’ choosing to waive tens of millions of dollars in claims, and the IRS accepting a reduced amount, the victims might have walked away with nothing.

“It’s been a case where myself [sic] and my professional team has [sic] been willing to hang in there and take a lot of risk on fees (being reimbursed at all) because there was no money to pay anyone,” Kapila told the Times. “This case required quantum effort.”