Legislative Protection for Charities Caught by Ponzi Clawbacks

Legislative Protection for Charities Caught by Ponzi Clawbacks

On April 3, 2012, Minnesota Governor Mark Dayton signed a new law, Chapter 151, House File 1384, designed to protect nonprofits from having to pay back donations made by Ponzi perpetrators and other fraudulent sources.  The new law actually restricts a trustee's recovery in three distinct ways.

First, it amends Minnesota Statutes § 513.41 to exempt charitable organizations from returning transfers made outside of a two year statute of limitations.  The current statute of limitation on fraudulent transfer lawsuits is six years.  The new statute effectively shortens the statute of limitations by amending the definition of a "transfer" to exclude any transfer more than two years before the commencement of the action, as follows: