Lawsuits against Cash Plus – Are they worth it?

A number of lawsuits against Cash Plus have been cropping up. However, I question the wisdom of such lawsuits. Cash Plus is now in receivership and under control of court appointed receivers(s) Effectively this could mean that Cash Plus is under control of the court and therefore all the lawsuits are against the court. The question therefore is, how is the court going to treat the claims of Haber, Robinson, Rowe et al? Will their claims be treated any differently than those of the other 35,000-45,000 “investors”?

My feeling is that the lawsuits might prove to be only profitable for the lawyers representing the above named clients. Why? Realistically and by cases that I have reviewed, where PONZI type operations where involved, this is what happens. Note, I am not a lawyer.

For illustration, we will use $100,000 as the principal invested and that there were 10 investors in 3 categories in the scheme. Let say the scheme(10% per month) crashed and all that can be recovered is $150,000 dollars (cash and cash from assets liquidated). For simplicity.

  • Investor Group A had gotten back principal , plus $20,000 (1 investors)
  • Investor Group B had gotten back $70,000 (3 investors)
  • Investor Group C had received no money as they were rolling (6 investors)

Given that the interest earned, was earned by fraudulent means or can be classed as ill-gotten gains, what is the equitable think to do?
It seem the equitable think to do is as follows

  • ignore interest earned that has not been paid and
  • interest that has been paid gets treated as re-payment of principal and
  • where interest has been paid, amounts to more that the principal invested, the difference, be returned to the company(in receivership) voluntary, coercion(publish names) or lawsuit if necessary.

Using the above example this is what would happen. Total principal repaid would be (100,000 x 1) + (70,000 x 3) = 310,000. This means principal owing would be 1,000,000 -310,000= 690,000.

Or another way to look at it

  • Investor Group B would be owed $30,000 ( 3 investors)
  • Investor Group C would be owed $100,000 (6 investors

This means that (6 x 100,000) + (3 x30,00) a total of 690,000 owed to investors with $20,000 actually owed to the scheme(1 investors).
However the total cash available to the receiver for settlement is only $150,000. He will try and recover $20,000 to bring that to $170,000. So now you have it $170,000 available to pay $690,000 or about 25 cents on the dollar, about 25%. The court now has a tricky problem, six(6) investors have received $0 while three(3) have received $70,000.

Scenario one: the court could argue that Investor Group B has received 70% of their money so they are ok and should get nothing more and the people that have received less than 25 % should be compensated.
Therefore Investor Group B, would receive no more money. The $170,000 would then be divided among the 6 persons 170,000/6 = 28,300, increasing the money recovered by the worse affected to roughly 28 cents or 28 %. Slightly higher than 25% but given that they did not have access to their money the extra could be seen as a little interest.
Scenario two: Another way is a slight twist of the above scenario. They would be to pay them roughly 25% of their principal i.e (6 x 25,000) =150,000 and then divide the 20,000 equally between the 9 investors.
Scenario three: The court simple pays roughly 25% of what is owed accross the board.
Investor Group B would get 24.64% i.e $7,391 each or $22174 in total
Investor Group C would get 24.64% i.e. $24,627 each or $147824 in total.
But what about the Lawsuits?

Lets twist the scenario a little now and introduce the lawsuits. Let us split the 6 investors in Group C into a new Group C, 4 investors and Group D, 2 investors who are filing lawsuits to recover their $100,000. Therefore re-capping we now have

  • Investor Group A, had gotten back principal , plus $20,000 (1 investors)
  • Investor Group B, had gotten back $70,000 ( 3 investors)
  • Investor Group C, had received no money as they were rolling (4 investors)
  • Investor Group D, had received no money as they were rolling (2 investors) and filing lawsuits

We have already established that there is only $150,000 possibly $170,000 available to repay investors. If the court awards the 1 person that has filed a lawsuit and orders the company to pay, i.e. $100,000, this would mean that only $70,000 ($170,000 – $100,000) would be available to pay the other 8 investors.

The situation would become even more troubling, if the court ordered the company to pay the 2 investors,filing lawsuits, $200,000 (100,000 x 2) as the $170,000 could not pay those investors. The question then would be what would happen to the other 7 investors, four(4) investors in Group C and three(3) investors in Group B? The above examples seem to highlight that those filing lawsuits in this case are simply wasting even more of their money on legal fees.

Attorney-at-law Shirley-Ann Eaton commenting on the lawsuits said it won’t bring any relief and thinks it makes no sense, especially with criminal action pending. She also argues that there is the issue of proceeds of crime, and that those proceeds could actually end up in the hands of the state.

These are just a few thoughts, but the bottom line is that likelihood of those filing lawsuits being treated different is very unlikely. Unfortunately this is one case where investors, big or small, uptown or downtown, local or overseas are in the same leaking boat.

List of Lawsuits (not all)

Cash Plus Investors to meet

Reports are surfacing that Cash Plus investors are scheduled to meet at JACISERA PARK off Molynes Road today, May 25,2008, at 4:30 p.m. Seemingly frustrated by the the failure of Cash Plus to pay, investors are to meet to possibly discuss active way forward.

What they are to discuss is not clear, as the fact that Cash Plus is in receivership leaves investors with not much choice but to now sit and wait. Whether, as a group, they we seek to join the list of those filing lawsuits is one thing that might come up.

Update: May 26, 2008. We are unable to get confirmation if the meeting did occur. We understand that another meeting is being planned but we are unable to confirm.

Cash Plus faces more lawsuits

Reports are surfacing that a group of overseas investors are preparing the sue Cash Plus to recover their investments. The latest reports follow other lawsuits already filed including two for sums in excess of J$100 million dollars.

One lawyer however is not seeing the point of the lawsuits. the following quote is taken from the Sunday Gleaner May 25, 2008.

Commenting on the lawsuits, attorney-at-law Shirley-Ann Eaton says suing Cash Plus will not bring people any relief.

“It makes absolutely no sense. There is nothing really to recover because they have to find out how much he really has and he hasn’t disclosed how much he really has,” Eaton reasons. “And, secondly, even if they sue, I do not see any court ordering immediate pay-over of the money if a criminal action is pending against them,” she adds.

Any money he has, she argues, may well be the proceeds of crime and the court will pay over the proceeds (to the State).

Look out for a follow-up article on whether or not these lawsuits make sense.


Cash Plus crash will impact economy

A Sunday Herald report is claiming that the failure of Cash Plus will affect the economy

“The meltdown of unregulated financial schemes triggered by the fall the Carlos Hill-led Cash Plus Group Limited will have a negative impact on the economy, which grew by only 1 per cent last year and 0.2 per cent during the first quarter of this year.”

It is going to interesting to see what would happen if other alternative investment clubs fail.