Ponzi schemes have some “interesting” tax consequences for their unfortunate victims. It seems that the schemes pose some challenges in the bankruptcy context as well. In Samji (Re), 2013 BCSC 2101, the Court approved a settlement under which some of the net “winners” in a particular scheme paid back their “profits” to the trustee but were entitled to keep the full amount of their original investment. The Court approved the settlement despite the objection of “losers” who had argued that the winners should also share in the losses of the entire group.
We know from R v Johnson, 2012 FCA 285, rev’g 2011 TCC 540 (discussed here), that a ponzi scheme “winner” must include the “profits” from the scheme in income for tax purposes. Query whether the “winners” are entitled to a deduction in computing income when they repay the “profits” as per Samji.
