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.
On May 15, 2017, the Supreme Court in Midland Funding, LLC v. Johnson ruled that a creditor does not violate the Fair Debt Collection Practices Act (FDCPA) by filing a proof of claim that discloses on its face that it is time-barred by the statute of limitations.[1] Most noteworthy about the opinion is that the majority scarcely touches on the policy implications of its ruling. The dissent, however, provides a full-throated critique of this type of practice by “professional debt collectors.”
When the trustee of a bankrupt company sues to avoid allegedly fraudulent transfers, one threshold element that he or she must generally show is that the transfer left the debtor with “unreasonably small capital.” Recent appeals in the SemCrude and Adelphia bankruptcy cases demonstrate that this a tough showing to make.
In re SemCrude L.P.[1]
Section 544(b)(1) of the Code enables a trustee to “avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim that is allowable under section 502....”[1] Pursuant to § 544(b), a trustee steps into the shoes of an unsecured creditor (the “triggering creditor” or “golden creditor”) to pursue the avoidance of fraudulent transfers utilizing the substantive law applicable to the triggering creditor
In Janvey v. Golf Channel, Inc., No. 13-11305 (5th Cir. Aug. 22, 2016), arising from the SEC enforcement action against Stanford International Bank, Ltd., pending in the U.S. District Court for the N.D. Tex., the U.S. Court of Appeals for the Fifth Circuit addressed the issue of whether trade creditors who fully perform in the ordinary course at market rates provide reasonably equivalent value to a Ponzi scheme, under the Bankruptcy Code and fraudulent transfer law in Texas (and beyond).
In a recent decision, the U.S. Court of Appeals for the Sixth Circuit found itself “obliged to explore some uncharted territory of Ohio substantive and procedural jurisprudence” arising out of fraudulent transfer and related claims from a Ponzi scheme.
In Meoli v. The Huntington National Bank (In re Teleservices Group Inc.),[1] 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 §§ 548 and 550 of the Bankruptcy Code.[2]
Section 523(a)(2)(A) of the Bankruptcy Code provides that to the extent a debt is obtained by “false pretenses, a false representation, or actual fraud[,]” it is excepted from discharge.[1] In the past, many courts have read the phrase “false pretenses, a false representation, or actual fraud” as meaning only fraud made through misrepresentation or omission. In the recent Supreme Court case of Husky Int’l. Elecs. Inc. v. Ritz,[2] the U.S.
The Commercial Fraud Committee had a productive year, producing three webinars, six newsletters, several case law eblasts, and the continuation of the committee-wide conference call program with four calls this year.