Victim of Fraud: Can You Recover Your Funds Placed in the Fraudster's Life Insurance Policy?

Imagine: you own a flat in Bastia that you rent to a couple. One day, you discover that your tenant has orchestrated a property fraud and has placed the stolen money in a life insurance policy or bank account in their name. You file a complaint, and the public prosecutor opens a judicial investigation. You think: 'I'll get my money back, it's the proceeds of the fraud, it belongs to me.' But the courts reject your claim: you are not the owner of those funds, and if the person under investigation is in judicial liquidation, you cannot obtain restitution before the trial.

This is precisely what the Court of Cassation ruled in its judgment of 23 October 2019 (No. 18-85.820). A decision that seems counter-intuitive but is based on precise legal reasoning. Who, then, can claim these sums? And how can you assert your rights?

In this article, I will explain step by step the judges' reasoning, what this decision actually changes for you, and give you practical tips to avoid finding yourself in this situation. Because in Bastia as elsewhere, prevention is better than cure.

The Facts: A Story Like Many Others

The case began in Lille, but it could just as easily have taken place in Bastia or Lucciana. A property developer, let's call him Mr X, offered investors the chance to buy properties for renovation. The victims paid substantial sums, sometimes several hundred thousand euros. But Mr X misappropriated the funds: he deposited them into his personal bank account, took out life insurance policies in the name of his wife and children, and even bought a property in the name of his in-laws. In short, a classic fraud (misappropriation of funds by breach of trust and fraud).

The victims filed a complaint. A judicial investigation was opened. At the same time, Mr X was placed in judicial liquidation by the Lille Commercial Court on 26 May 2015. The victims, as civil parties, then asked the investigating judge for the restitution of the funds seized from the accounts and life insurance policies. Their argument: these funds are the proceeds of the offence, they belong to us.

The investigating judge refused. The civil parties appealed to the investigating chamber, which upheld the refusal. The Court of Cassation was then seised. And on 23 October 2019, it dismissed the victims' appeal. Why? Because, according to the law, the victim of fraud or breach of trust is not considered the owner of the funds that are its proceeds within the meaning of Article 99, paragraph 4, of the Code of Criminal Procedure (CPP). In other words, just because the money was stolen does not mean the victim is legally the owner of it in criminal proceedings.

The Reasoning of the Court — Explained

To understand this decision, we need to look at Article 99 of the CPP. This article provides that, during the investigation, seized property may be returned to its owner if the owner so requests. But note: the owner must be the person who holds a right of ownership over the property in the civil law sense, i.e., they must be able to prove that they are the legitimate owner. However, in the case of fraud or breach of trust, the Court of Cassation considers that ownership of the funds was transferred to the fraudster at the time of voluntary delivery. In other words, when a victim pays money to a fraudster, they transfer ownership of the funds, even if that transfer is vitiated by deceit (fraud).

So how can the victim recover their money? Through a civil action for liability (Article 1240 of the Civil Code) or an action to assert ownership, but not within the framework of criminal restitution. What few people know is that criminal law and civil law have different logics. Criminal law punishes, civil law repairs. Here, the victim must wait for the final conviction of the fraudster and join as a civil party to obtain damages. But if the fraudster is in judicial liquidation, as was the case here, confiscation of assets (a criminal measure) takes precedence over restitution. Why? Because confiscation is not a claim for payment; it does not aim to reimburse victims but to deprive the convicted person of the fruits of their crime.

The judges therefore identified two obstacles: on the one hand, the civil party cannot claim ownership of the funds; on the other hand, the judicial liquidation of the person under investigation prevents any restitution at the investigation stage. The decision is consistent with established case law: the victim of an offence is not the owner of the funds within the meaning of Article 99, paragraph 4, of the CPP (Crim. 10 May 2007, No. 06-88.449).

What This Means for You — Practically

If you are a landlord-owner in Lucciana and your tenant misappropriates the rents you entrusted to them by placing them in their life insurance policy, you cannot ask for restitution of those sums during the investigation. You will have to wait for the judgment and hope that the fraudster still has seizable assets. But beware: if the fraudster is in judicial liquidation, you will be an unsecured creditor, and criminal confiscation will take priority over you.

Let's take a concrete example: you paid €50,000 to a developer in Bastia for a renovation project that never materialised. The developer places this money in an account in their name. You file a complaint. The investigating judge seizes the account. You ask for restitution: refused. You will have to wait for the trial and then join as a civil party to obtain damages. If the developer is in liquidation, you will be classified as an unsecured creditor (without security) and will recover only a fraction, if anything.

For the tenant, the situation is different: if you are a victim of fraud by your landlord (e.g., a misappropriated security deposit), you are in the same situation as above. However, if you are a co-owner and the management company has misappropriated the co-ownership funds, the co-ownership can take legal action, but restitution of the seized funds will be blocked by the same case law.

So, how should you react? First, do not delay in taking action. The sooner you file a complaint, the sooner the funds can be seized and frozen. Next, consider a parallel civil action: a claim on the merits before the judicial court to obtain restitution on the grounds of unjust enrichment or recovery of undue payments (Article 1302 of the Civil Code). But beware: in the event of judicial liquidation, the liabilities are fixed, and you must declare your claim to the judicial receiver within the time limits (2 months from the publication of the opening judgment).

Four Tips to Avoid This Type of Dispute

• Always check the solvency and honesty of your contracting party. Before paying significant sums, ask for references, check the trade register, and require guarantees (bank guarantee, financial guarantee for developers). In Bastia, a serious developer must be able to provide a completion guarantee.
• Avoid transfers to personal accounts. Insist that funds be paid into a dedicated professional account or an escrow account. In the event of a dispute, it will be easier to trace the funds and prove their origin.
• If you suspect something, act quickly. At the first signs of misappropriation, file a complaint and inform the investigating judge of the existence of life insurance policies or foreign accounts. Limitation periods (6 years in civil matters for contractual liability actions) run quickly.
• Consult a lawyer lawyer. A lawyer specialising in property and criminal law can advise you on the best strategy: criminal action, civil action, declaration of claim. Early advice can save you years of proceedings.

Further Reading: Related Case Law and Developments

The Court of Cassation here confirms well-established case law. In a judgment of 10 May 2007 (No. 06-88.449), it had already ruled that the victim of a breach of trust cannot claim ownership of the funds within the meaning of Article 99 of the CPP. This position is consistent: voluntary delivery of funds, even if vitiated, transfers ownership. However, some recent decisions have opened up possibilities. For example, in money laundering cases, the Court of Cassation has held that seized funds may be returned to the civil party if they prove they are the true owner (Crim. 6 March 2019, No. 18-82.640). But beware: this is not the case for simple fraud.

The courts' tendency is therefore strict: criminal restitution is reserved for owners in the civil law sense, and judicial liquidation blocks any claim. In the future, one might hope for a legislative change, but for now, caution is advised.

Frequently Asked Questions

Can I recover my money if the fraudster is not in judicial liquidation?
Yes, but not through criminal restitution. You must wait for the conviction and join as a civil party. If the fraudster has assets, you can obtain damages. But if the seized funds are confiscated, they go to the State (unless the judge decides otherwise).

What should I do if I have already paid money to a suspicious developer in Bastia?
File a complaint immediately and freeze the bank accounts and life insurance policies. Consult a lawyer to see if an interim civil action is possible to block the funds.

What is the deadline for declaring my claim in the event of judicial liquidation?
You have 2 months from the publication of the liquidation opening judgment in the Bodacc (Official Bulletin of Civil and Commercial Announcements). After this deadline, your claim is time-barred.

Can I request confiscation of the fraudster's assets for my benefit?
No, confiscation benefits the State. You can only claim damages, but if the fraudster is insolvent, you will not be paid.

Can the fraudster's life insurance policy be seized to reimburse me?
Yes, but only after a final conviction and subject to the rights of third parties (beneficiaries of the life insurance policy). The procedure is complex.

Are you in a similar situation? An initial 30-minute consultation with Maître Zakine (€45) could save you months of proceedings — and often much more. Book an appointment →