The U.S. Court of Appeals for the Second Circuit affirmed the U.S. Bankruptcy Court for the Southern District of New York’s dismissal of a complaint brought by Rosenman Family, LLC, an investor with Bernard L. Madoff Investment Securities LLC (BLMIS), against the trustee of BLMIS’s estate. The complaint alleged that Rosenman was entitled to a return of $10 million it wired to BLMIS, because, Rosenman argued, the funds were stolen or embezzled by BLMIS and thus never became BLMIS’s property and/or part of BLMIS’s bankruptcy estate.
After a relatively brief and checkered stint in Delaware courts, it appears that the cause of action against corporate directors for “deepening insolvency” may have lost its place in Delaware corporate jurisprudence.
A federal judge in New York – the Hon. Richard J. Sullivan – mostly granted JP Morgan Chase Bank’s motion to dismiss claims brought on behalf of unsecured creditors of Lehman Brothers Holdings Inc. related to JPM’s requirement that Lehman Brothers Inc., LBH’s broker-dealer subsidiary, pledge and post extra collateral in September 2008, shortly before LBI filed for bankruptcy protection on September 15, 2008.
On May 29, 2012, the U.S. Supreme Court, in a unanimous decision, resolved a high-profile circuit split regarding the right of secured creditors to credit bid in an asset sale under a chapter 11 plan. In RadLAX Gateway Hotel, LLC v. Amalgamated Bank,1 the Court held that a debtor cannot deny a secured creditor the right to credit bid as part of a chapter 11 plan providing for the sale of assets free and clear of the secured creditor’s liens on those assets.
The U.S. Bankruptcy Court for the District of Massachusetts recently denied a motion for summary judgment on the issue of damages by investors in Access Cardiosystems, Inc. against one of the defendants, Randall Fincke. The investors had asserted claims against Mr.
On March 12, West Coast Life Insurance Co. added civil conspiracy and several violations of Florida law to a complaint alleging that an investment company, several insurance brokers and individual policyholders engaged in an illegal stranger-owned life insurance (STOLI) scheme. The amended complaint alleges that Park Venture Advisors masterminded and implemented the plan, which involved the sale of individual life insurance policies to private investors, while Wells Fargo Delaware Trust Co.
Key Point
- The UK government's proposals to only partially implement a new UNCITRAL Model Law means that creditors of English law debts who do not consent to a foreign restructuring proceeding will still have recourse to enforcing their rights against the debtor's UK-based assets.
English Law Is Still a Special Situation
Unsecured general creditors of defunct MF Global, Inc. (other than those of its parent company MF Global Holdings Ltd.) will receive a final payment from the firm, giving them a total recovery of 95 percent of their approved claims, under a proposal made last week by the overseers of the liquidation of the firm and its parent company.
The United States Bankruptcy Court for the District of New Jersey recently found that a debtor’s transfer of property owned by a corporation in which the debtor allegedly held a 50% interest did not automatically constitute a transfer of assets of the debtor’s bankruptcy estate. After the debtor filed a voluntary Chapter 7 bankruptcy petition, the Chapter 7 trustee filed an adversary complaint alleging that the debtor purposefully had executed a post-petition mortgage lien on certain real property owned by a corporation of which the debtor was a 50% owner.
Given the overarching Madoff Ponzi scheme as well as other mini-Madoff schemes that surfaced in its wake, many have been following issues arising from the ability of a trustee to claw back transfers (either as preferential or as fraudulent transfers) from investors who redeemed their interests in a private investment fund or managed account that turned out to be a Ponzi scheme. The law generally provides that an investor’s principal investment is protected so long as it is received in good faith and for value.