Court records show 59 clawbacks were filed in bankruptcy court from the beginning of February through Thursday, bringing the total in the case to 101. Two additional related lawsuits have been filed against Vaughan insiders in Bernalillo County District Court.
The clawbacks, which are basically civil lawsuits for money owed, are being filed by attorneys for court-appointed trustee Judith Wagner, who is in charge of liquidating the company’s bankruptcy estate.
The deadline for Wagner to file clawbacks is Feb. 22, which is the two-year anniversary of Vaughan and his company filing for bankruptcy court protection.
Last December, Vaughan admitted that he had been running a Ponzi scheme, an investment swindle in which money put up by later investors is used to pay fake profits to earlier ones. The 64-year-old former real estate executive faces a 10- to 12-year sentence in federal prison.
Federal prosecutors say Vaughan ripped off $75 million from about 600 investors, who believed their money was being used for real estate investments. Instead, Vaughan used their money to perpetuate his scheme, subsidize his money-losing real estate business and finance a lavish personal lifestyle.
The clawbacks in bankruptcy court are based on the premise that Vaughan was a fraud and that the payments he was making to investors were “fraudulent transfers.” Under the bankruptcy code, the trustee has authority to go after those transfers.
The majority of the people targeted by clawbacks have been investors who profited from Vaughan’s scheme. These so-called “net gainers” had the principal amount of their investment paid off over time and were reaping unrealistic profits from Vaughan’s continued interest payments.
Other clawback targets have been Vaughan insiders, who typically earned commissions for luring people to invest with Vaughan, and so-called “sophisticated” investors who supposedly should have known Vaughan was running a scam.