Adviser to Ponzi scheme victims goes bust

Personal injury lawyers carved a niche for themselves in ambulance-chasing, and class-action-plaintiff's attorneys cornered the market on asbestos suits. Unfortunately for boutique firm ITS Recovery Group, the Ponzi-scheme-victims market is not yet ripe for specialization. The legal and tax consultancy, which specialized in helping victims of investment fraud maximize tax-loss deductions and recover funds, filed for Chapter 7 bankruptcy protection on Friday. It listed assets of $2.9 million and liabilities of roughly the same amount. The firm was trying to target the market of jilted investors created by the high-profile fraudsters indicted over the past two years. It focused on recent IRS rulings that allow investors to claim theft-loss deductions on their income tax returns and possibly recover back-taxes. It also claimed a specialty in helping professional athletes who'd been swindled by their financial advisers. “If you were a victim in a Ponzi scheme or were defrauded by your broker, financial advisor or investment firm,” reads its website, “Please contact ITS Recovery Group…to determine whether or not you qualify for significant tax benefits under IRS Code 165(c)(2).” It boasted of a team of tax professionals, certified fraud examiners, theft-loss specialists and legal experts, though bankruptcy court papers listed only Anthony Troy Flax, founder and sole officer of the firm. It was headquartered on Wall Street until July of this year, when it relocated to Jersey City, N.J. The firm earned money—or didn't, as it turns out—on a contingency basis, taking a percentage of any financial recovery realized. It wouldn't get paid if its efforts failed. At the time of the filing, ITS Recovery listed 11 clients with combined pending recoveries estimated at $2.5 million. Phone calls to the numbers listed on the firm's website did not go through. The attorney who prepared the bankruptcy filing, Edward Neiger of Neiger LLP on Madison Avenue, declined to comment. [Crain's New York Business is a sister publication of InvestmentNews].