First Department Applies the In Pari Delicto Defense to Commodity Exchange Act “Equity” Receiver Claims

In the face of a vigorous dissent, the New York Appellate Division, First Department, applied the in pari delicto defense to sustain the dismissal of claims by a court-appointed receiver over the interests and property of a corporate entity run as a Ponzi scheme by its sole owner: Castleman v. Interactive Brokers LLC, 2026 NY Slip Op 05904 (1^st Dep’t Decided Oct. 13, 2026).

The main issue in Castleman was whether the in pari delicto defense can be applied to bar a claim by a receiver appointed in an action instituted by the Commodity Futures Trading Commission (CFTC) against the corporate entity and its sole owner for running the Ponzi scheme. The lower court and the First Department in Castleman ruled that such a receiver was akin to bankruptcy trustees and other receivers who stand in the shoes of the fraudulent corporation and therefore was barred from asserted claims against an outside brokerage firm who allegedly aided the Ponzi scheme.

Read the full blog post here.