Cunningham v. Brown

265 U.S. 1 (1924)

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Cunningham v. Brown

United States Supreme Court
265 U.S. 1 (1924)

AR

Facts

Bankruptcy trustees brought six suits against Charles Ponzi based on Ponzi’s scheme to defraud investors by paying older investors’ alleged returns with money given to Ponzi by newer investors. In fact, Ponzi never invested the money in anything. When a newspaper reported the details of the scheme, there was an investor run on Ponzi’s accounts. Some investors claimed that they had rescinded their agreements with Ponzi and that this gave them priority over others who were trying to get their money back by the terms of Ponzi’s contract. The investors who allegedly rescinded sued for priority, and the district court and the appeals court ruled in their favor. The United States Supreme Court granted cert.

Rule of Law

Issue

Holding and Reasoning (Taft, C.J.)

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