Tag Archives: Fraudulent transfer

How safe is safe?

Earlier this month, the United States Supreme Court agreed to review a Seventh Circuit decision regarding the scope of the so-called “safe harbor” from avoidable transfers provided in Section 546(e) of the Bankruptcy Code.  Many in the U.S. bankruptcy industry expect that the Supreme Court granted certiorari to hear Merit Management Group, LP v. FTI … Continue Reading

Smelting the Assets (directors’ duties/transactions at undervalue and to defraud creditors)

Dickinson v NAL (Realisations) Staffordshire Ltd is a useful case on how directors’ duties are looked at following a formal insolvency and ways in which an office holder can challenge transactions if there is evidence of wrongdoing or a concerted strategy to frustrate creditors’ recourse to a Company’s asset base which would ordinarily be available … Continue Reading

What You Do Won’t Help (But What You Can’t Do Might): The Sixth Circuit Clarifies Defenses to Fraudulent Transfers

In Meoli v. The Huntington National Bank (In re Teleservices Group, Inc.), the U.S. Court of Appeals for the Sixth Circuit examined the elements of “good faith” and “knowledge of the voidability of the transfer avoided” that initial and subsequent transferees must establish when defending against fraudulent transfer claims brought under sections 548 and 550 … Continue Reading

“Reasonably Equivalent Value” – – A Path Without Guideposts.

“Reasonably equivalent value” – – part of the standard for evaluation of potential constructive fraudulent transfers – – is both subjective and imprecise. The words “equivalent value” require the court to make a subjective judgment whether consideration received in exchange for a transfer is worth the same as the consideration transferred by the debtor. And … Continue Reading

Any Port in a Storm – the Safe Harbor of Section 546(e)

A bankruptcy court wrote that filing for bankruptcy is “powerful magic.”  By finding federal preemption of state law fraudulent transfer claims, the Second Circuit Court of Appeals’ decision in the long-running Tribune case showed just how powerful this magic can be. The Tribune saga began in 2007 when, during steep changes in the publishing industry, … Continue Reading

Red Flag Warnings: Ignore Them At Your Peril

When can a bank be at risk of unknowingly receiving a fraudulent transfer?  How much information does a bank need to have before it is on “inquiry notice”?  A recent decision from the Seventh Circuit Court of Appeals highlights the risks that a bank takes when it ignores red flags and fails to investigate. In … Continue Reading

How The Casino Kept Its Chips From A Bankruptcy Claw-Back

Insiders who loot their corporate entities often dispose of the cash proceeds in transactions with third parties. A recent Seventh Circuit opinion, In re Equipment Acquisition Resources, Inc., 14-2174 (7th Cir. October 13, 2015) (the “EAR Opinion”) addresses a common risk faced by a third party who receives cash from the defrauding insider. Generally, a … Continue Reading

I’ve just learned my customer is a crook – do I have to return the money he’s paid me?

Suppliers of good and services (“trade creditors”) generally have no duty to determine whether their customers are operating an illegal enterprise. However a recent Fifth Circuit opinion presents an unprecedented “claw-back” risk facing trade creditors who unknowingly provide goods and services to a “Ponzi-scheme” enterprise. The Janvey Opinion In Janvey v. The Golf Channel, 13-11305 … Continue Reading
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