The United States Court of Appeals for the Seventh Circuit, on March 19, 2014, held that a corrupt debtor’s pre-bankruptcy cash transfer to a commodity broker was a “settlement payment” made “in connection with a securities contract,” thus falling “within [Bankruptcy Code] §546(e)’s safe harbor” and insulating the transfer from the trustee’s preference claim. Grede v. FCStone, LLC (In re Sentinel Management Group, Inc.), 2014 WL 1041736, *7 (7th Cir. Mar. 19, 2014).

The U.S. Court of Appeals for the Seventh Circuit held on Aug. 26, 2013 that an investment manager’s “failure to keep client funds properly segregated” and subsequent pledge of those funds “to secure an overnight loan” to stay in business may have constituted: (a) a fraudulent transfer to the lender; and (b) grounds for equitably subordinating the lender’s $312 million secured claim. In re Sentinel Management Group, Inc., 2013 WL 4505152, *1 (7th Cir. Aug. 26, 2013) (“Sentinel II”).

Appellate courts continue to agree on the vitality and breadth of the safe harbor defense contained in Bankruptcy Code ("Code") § 546(e) (insulating from the trustee's fraudulent transfer or preference attack "settlement payment" or "margin payment" on a "securities contract," "commodity contract" or "forward contract" except when the debtor's payment is made with "actual intent to hinder, delay, or defraud" creditors). In re Quebecor World (USA) Inc., 2013 WL2460726, *1 (2d Cir.

A settlement has been announced in the Tronox Securities Litigation,^[1] making it one of the first cases where the failure to publicly disclose environmental liabilities has resulted in a substantial settlement.

In a decision likely to affect thousands of Madoff investors, the Second Circuit Court of Appeals on Aug. 16, 2011 unanimously upheld the method used by the liquidating trustee for Bernard L.

The United States Bankruptcy Court for the Southern District of New York, overseeing the bankruptcy cases of Lehman Brothers Holdings Inc. (“LBHI”) and its affiliated debtors (collectively, the “Debtors”), entered an order on Aug.

DURING THE PAST YEAR, many investors in the distressed debt market have received postreorganization private equity1 either through a confirmed plan of reorganization or through participation in a rights offering. Unlike publicly traded equity, each new issuance of postreorganization equity leaves recipients, issuers, and agents potentially facing uncharted territory in terms of how the instrument is to trade and settle.

CURRENTLY, NEGOTIATION and documentation of claims trades remain largely unregulated, with only limited oversight from bankruptcy courts and the Securities and Exchange Commission. Generally, the bankruptcy court’s, or the claims agent’s, involvement in claims trading is ministerial, i.e., maintaining the claims register and recording transfers if the form complies with the rule. Only if there is an objection to a claims transfer does the bankruptcy court become involved in the substance of a transfer.

The U.S. Court of Appeals, in a 2-1 decision on June 28, 2011, held that Bankruptcy Code § 546(e), which exempts a “Settlement Payment” from a bankruptcy trustee’s avoiding powers, insulated two sellers of Enron Corporation’s commercial paper from suit despite Enron’s early pre- bankruptcy redemption. Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., ___F.3d ___, 2011 WL 2536101 (2d Cir. June 28, 2011) (2-1).

In a Jan. 20, 2010, opinion, Judge Christopher S. Sontchi of the U.S. Bankruptcy Court for the District of Delaware held that a group of investors who had together proposed a plan of reorganization for the debtor did not have to comply with the disclosure requirements of Federal Rule of Bankruptcy Procedure 2019 (“Rule 2019”) In re Premier International Holdings, Inc., No. 09-12019 (Bankr. D. Del. Jan. 20, 2010) (Sontchi, J.) (“Six Flags”). In Six Flags, Judge Sontchi expressly disagreed with two prior decisions on the subject of Rule 2019 disclosure, one by Judge Mary K.