What is Defalcation?

Defalcation is the theft or misuse of funds or other assets by someone who has responsibility to protect those assets. It is usually committed by a professional who is presumed to have a sufficient level of expertise to be able to handle funds or assets in a safe manner.

Examples of Defalcation

An example of defalcation is when a trustee invests funds improperly, resulting in their loss. A variation on the concept is when a chief financial officer uses a wire transfer to direct funds into his own personal offshore bank account.