CFL Asset Tracing & Recovery

Question 1

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

Accepted Answer

Mareva injunction (freezing order)

Answer

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

Question 2

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

Accepted Answer

Alter ego doctrine

Answer

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.

Question 3

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

Accepted Answer

To connect specific identifiable assets to the original misappropriated funds

Answer

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.

Question 4

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

Accepted Answer

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

Answer

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.

Question 5

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

Accepted Answer

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

Answer

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.

CFL - Certified Financial Litigator Practice Test

CFL - Certified Financial Litigator Practice Test

CFL Asset Tracing & Recovery