McAdams fraud bill 1

U.S. Rep. Ben McAdams, R-Utah, and Salt Lake City-based securities regulation attorney Mark Pugsley speak at a press conference on Monday, Nov. 25, 2019 about McAdams' bill that would help victims of investment fraud recover lost funds. 

U.S. Rep. Ben McAdams, D-Utah, held a press conference Monday morning to discuss a bill he introduced that, if signed into law, would help victims of investment fraud and Ponzi schemes recover lost money.

House Resolution 4344, the Investor Protection and Capital Markets Fairness Act, would increase the statute of limitations for the U.S. Securities and Exchange Commission to recover gains lost in financial schemes to 14 years. The current statute of limitations, as of 2017, is five years.

The bill passed through the House of Representatives on Nov. 18 with a 314-95 vote and had bipartisan support, McAdams said. It is currently in the Senate and has been referred to the Committee on Banking, Housing and Urban Affairs. If it passes through the Senate, it will go to the president’s desk to be signed into law.

There was no statute of limitations for recovering illegally gotten gains prior to a 2017 U.S. Supreme Court ruling in a case involving Charles Kokesh, who securities regulators charged with misappropriating nearly $35 million in funds from four business development companies between 1995 and 2006, Business Insurance reported. The Supreme Court ruled that a five-year statute of limitations applied to the case and ordered Kokesh to disgorge $5 million to the SEC.

As a result of the ruling, the SEC has been “hampered in returning victims’ money,” McAdams said.

“These investment frauds are complicated and take time to unravel,” McAdams said on Monday. “They (the SEC) need the tools to ensure that … innocent victims of (financial schemes) have some chance to get back at least some of their hard-earned money.”

In May 2018, less than a year after the Kokesh ruling, the SEC estimated that it hadn’t been able to recover more than $800 million in ill-gotten gains that otherwise would have been distributed to wronged investors, according to The Wall Street Journal.

Mark Pugsley, a securities regulation attorney for the Salt Lake City-based Ray Quinney and Nebeker who joined McAdams at the press conference, said the bill would lead to “significantly greater recoveries for victims of fraud here in Utah and throughout the United States.”

“Through the course of my career, I’ve seen how difficult it is for people to recover their losses,” Pugsley said, who has represented investment fraud victims for 25 years.

Pugsley’s research shows that Utah leads the country in its rate of Ponzi schemes, a form of investment fraud where new investors generate profits for old investors, as opposed to investors being paid from product sales or other legitimate forms of revenue.

Between 2008 and 2018, there were 42 publicly reported Ponzi schemes in Utah, a rate of 1.35 schemes per 100,000 people. The next highest rates were in Florida and New York, which had rates of 0.51 and 0.45 schemes per person, respectively.

These 42 schemes in Utah led to more than $1.5 billion in losses, or $502.39 per capita.

“We have a big problem here,” Pugley said.

McAdams, who worked as a securities attorney prior to being elected to the Utah Senate in 2009, said the state’s “close-knit community” character makes residents especially vulnerable to fraud.

“(Fraudsters) are preying upon what I love about Utah,” the 4th District representative said. “We are quick to trust, we’re quick to see the best in others and to extend a hand of friendship … our greatest strength, they turned into our greatest weakness.”

McAdams added that he thinks it is important to not “victim-shame” those who have been wronged by financial schemes.

The bill, which McAdams introduced alongside Rep. Bill Huizenga, R-Michigan, was originally drafted to not put any limitation on how far back fraud victims could recover losses, McAdams said. The 14-year statute of limitations was added as a compromise with legislators who felt there should be some limit.

McAdams said the law would not be retroactive and therefore would only apply to financial fraud cases moving forward.

Connor Richards covers government, the environment and south Utah County for the Daily Herald. He can be reached at and 801-344-2599.

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