FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

Ponzi Schemes. If investor received back funds that exceed the principal investment,then e these amounts are avoidable transfers by the debtor to the investors. Funds receivednot in excess of original contribution are generally safe assuming the investor acted in goodfaith without knowledge of the Ponzi scheme or any financial trouble of the debtor.Since the trustee need only show intent to hinder, delay or defraud, a Ponzi scheme, bydefinition meets the standard. Usually trustee can only recover “fictitious profits” underconstructive fraud theory but may be able to recover returned principal as well if shown thatinvestor did not act in good faith based on investor’s knowledge of the fraud.Marital Distributions. State divorce court approval (even subsequent) as part of regularlyconducted divorce proceeding, absent evidence of collusion , conclusively establishedreasonably equivalent value. In re Zerbo (2008, 397 B.R. 642Burden of proof on party asserting fraudulent transfer by preponderance of the evidenceTerms:Transfer: Defined under Section 101(54) as (a) creation of a lien; (b) retention of title assecurity; (c)foreclosure of right of redemption;(d) each mode, direct or indirect, absolute orconditional, voluntary or involuntary, of disposing or parting with (i) property; or (ii) aninterest in property. In other widest it is interpreted broadly to include ever grant of propertyor an interest therein.Insolvency: balance sheet analysis. Liabilities are greater than assets. Under 548 exemptassets are not included in the analysis, neither are contingent liabilities carried at full valuebut are discounted by the probability of the contingency. UFCA defines as “present fairsalable value of his assets is less than the amount that will be required to pay his probableliability on his existing debts as they become absolute and matured.Solvency is balance sheet analysis• Court did not include in balance sheet analysis a tort victims as yet unliquidated, not‐sued‐upon,and unmatured claim for abuse as it was not yet a debt. Shelly v. Doe 1997, 173 Misc.2d 200,660 N.Y.S.2d 937, Affirmed as modified 249 A.D. 756, 671 N.Y.S. 2d 803Reasonably Equivalent Value: Not defined under the Code. UFCA uses the term “”fairconsideration”. Always determined on a case by case basis and is generally a matter ofequity.Payment under a guarantee giving by debtor not fair consideration if underlyingGuarantee can be avoided as fraudulent obligation. Nirvana restaurant, Inc., 2006, 337 B.R.495