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Section 101(54) defines “transfer” to mean “each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with[] (i) property; or (ii) an interest in property.”[1] But is a deposit or wire transfer into a debtor’s bank account a “transfer” within the meaning of § 101(54)?
Bankruptcy trustees have tested the limits of the § 546(e) safe harbor since its enactment. In case after case, the courts, with few exceptions, have expanded those limits — that is, perhaps, until now. On Monday, Nov. 6, 2017, the U.S. Supreme Court heard argument in the case of Merit Management Group LP v. FTI Consulting Inc. to resolve the 5-2 circuit split concerning the proper scope of the § 546(e) safe harbor.[1]
The U.S. Supreme Court has, for four decades, been rocking the boat [that’s Justice Blackmun’s metaphor] on bankruptcy court authority. First, they almost killed the Code, coming within one vote of declaring the entire Bankruptcy Code unconstitutional. Then, they limit and mess with it some more. Now, finally, it seems they are focused on making bankruptcy court authority work, rather than trying to restrain it.
Notably, all of these Supreme Court cases have something to do with fraud-type claims.
Section 523(a)(2)(B) provides that an individual debtor’s debt is not discharged to the extent the debt was obtained by use of a statement in writing that (1) is materially false, (2) is respecting the debtor’s financial condition, (3) is one on which the creditor reasonably relied and (4) was caused by the debtor to be made or published with intent to deceive. Recently, in Privitera v. Curran (In re Curran),[1] the First Circuit considered the limits of a materially false statement by omission.
Commingling of funds frequently occurs in fraud cases and is notably common in Ponzi scheme cases. It occurs when funds belonging to one party are deposited into the same bank account as funds that belong to a different party. Because money is fungible, it is not possible to trace exactly which dollars belong to which party if they reside in the same bank account.
