Minnesota Ponzi Scheme Fallout Spans the Globe

A bankruptcy trustee’s quest to recover money tied to convicted Ponzi scheme-operator Tom Petters is going global.

Douglas Kelley, the trustee for bankrupt entities Mr. Petters once ran, on Monday asked a Minnesota bankruptcy-court judge for permission to pursue so-called clawback claims in 26 countries against recipients of money that Mr. Petters illegally obtained. The list spans the world—Australia, Bahrain, Canada, Ireland, Spain and Switzerland—and Mr. Kelley said the number of countries is expected to expand.

In 2009, Mr. Petters was convicted of 20 counts of fraud and sentenced to 50 years in prison for perpetuating a Ponzi scheme that cost investors $3.5 billion. A bid to shorten his sentence to 30 years failed in December, with a federal judge in Minnesota calling the request “one final con” by a man “staring into the abyss of nearly 15,000 days of incarceration.”

Under U.S. bankruptcy law, Mr. Kelley must receive court permission before pursuing the clawback claims abroad. To help pursue the claims, he has already retained international counsel at Withers in the British Virgin Islands as well as Cayman Islands firm Stuarts Walker Hersant.

More than 200 adversary proceedings against 382 defendants have already been brought in the U.S. to recover “false profits, bonuses, commissions, gifts” and other money Petters improperly distributed, according to court filings. Mr. Kelley on Wednesday told Bankruptcy Beat that some $63 million has been recovered through the litigation to date.

A hearing on Mr. Kelley’s motion is scheduled for April 23.

Write to Sara Randazzo at [email protected]. Follow her on Twitter at @sara_randazzo.