Asset Tracing & Recovery Flashcards

What type of court order is specifically designed to freeze a defendant's assets to prevent dissipation pending the outcome of litigation?

Answer: Mareva injunction (freezing order)

A Mareva injunction (freezing order) is the equitable remedy specifically designed to prevent defendants from moving or dissipating assets before a judgment is entered.

Which doctrine allows courts to disregard the separate legal existence of a corporation to reach assets held by its controlling owner?

Answer: Alter ego doctrine

The alter ego doctrine treats the corporation and its controller as a single entity, piercing the corporate veil when the corporation is used as a sham to perpetrate fraud or avoid liability.

In financial litigation, what is the primary purpose of 'tracing' misappropriated funds?

Answer: To connect specific identifiable assets to the original misappropriated funds

Tracing establishes a connection between specific current assets and the original misappropriated funds, allowing the claimant to assert a proprietary right to those assets or their traceable proceeds.

What is a constructive trust in the context of asset recovery?

Answer: An equitable remedy imposed by courts to prevent unjust enrichment by requiring the holder to return assets

A constructive trust is an equitable remedy imposed by courts—not created by agreement—requiring the person holding assets obtained through fraud or breach of duty to return them to the rightful owner.

Under the civil RICO statute (18 U.S.C. § 1964(c)), what must a plaintiff establish to pursue asset recovery?

Answer: A pattern of racketeering activity consisting of at least two predicate acts that caused injury to the plaintiff's business or property

Civil RICO requires proof of a 'pattern of racketeering activity' (at least two predicate acts within ten years) that proximately caused injury to the plaintiff's business or property, entitling the plaintiff to treble damages.

Which post-judgment discovery mechanism compels a judgment debtor to appear and answer questions under oath about their assets and finances?

Answer: Examination of judgment debtor (debtor's examination)

A debtor's examination (also called examination of judgment debtor) is a post-judgment proceeding that requires the debtor to testify under oath about the location and nature of their assets so the creditor can enforce the judgment.

What is a 'charging order' and how does it function in asset recovery against a member of an LLC?

Answer: A lien that attaches to the debtor's distributional interest in an LLC, entitling the creditor to receive any distributions made to that interest

A charging order attaches to the judgment debtor's economic interest in an LLC, entitling the creditor to receive any distributions that would otherwise go to the debtor, without giving the creditor management or voting rights in the entity.