On November 13, 2009, the Court of Appeals for the Fifth Circuit ruled in the Stanford securities fraud case that the appointed receiver lacked authority to “claw back” principal and interest proceeds distributed to innocent investors/creditors because they have a legitimate ownership interest in the proceeds held in the accounts. This precedent has important implications for this and other ongoing “Ponzi” scheme cases.
The Stanford Case: Alleged Multi-Billion Dollar Ponzi Scheme
5620 Central Avenue, LLC recently filed for Chapter 11 bankruptcy, and, although no sale has been announced, the Debtor’s assets may be available for acquisition under the right circumstances. The Debtor’s real property is located at 5620 Central Avenue in El Cerrito, California, valued at $6 million. The property is described as parcels 510-053-32, 510-053-33 and 510-053-25. Real estate listings describe the property as a 142,000 sq. ft. vacant lot that is zoned C-3 Regional Commercial. The Debtor did not list any income.
The Eastern District of Pennsylvania held that secured creditors do not have a right to credit bid their claim when the sale of a debtor’s assets is conducted under a plan of reorganization.
On December 2nd, the House Financial Services Committee approved the Financial Stability Improvement Act, H.R. 3996, which creates a financial risk oversight council and provides for a mechanism for winding down a systemically important non-bank financial institution facing collapse. Committee Press Release. See also Bill Summary.
On Friday, the Illinois Department of Financial and Professional Regulation - Division of Banking closed Benchmark Bank, headquartered in Aurora, Illinois, and the FDIC was named as receiver.
After more than a decade of rising real estate values, the tide has turned against commercial and development real estate, prompting major builders and developers to commence Chapter 11 bankruptcy proceedings. As a result of the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, many Chapter 11 cases that revolve around real estate will fall within the Bankruptcy Code’s definition of single asset real estate (SARE) cases and are thus subject to special provisions in the Bankruptcy Code.1 As a result, it is now time to think about SARE.
In an Opinion issued on December 2, 2009 in the Washington Mutual, Inc. ("WaMu") Chapter 11 case, the Delaware Bankruptcy Court held that Bankruptcy Rule 2019 clearly applies to "ad hoc committees," regardless of how they might try to disclaim collective action. As a result, the members of an informal group of WaMu bondholders must now provide detailed information concerning their holdings, including a history of when they bought and sold their bonds and the prices paid. Perhaps more importantly, the Opinion packs a second bombshell.
On Friday, AmTrust Bank, headquartered in Cleveland, Ohio, was closed by the OTS and the FDIC was named as receiver. As receiver, the FDIC entered into a purchase and assumption agreement with New York Community Bank, headquartered in Westbury, New York, to assume the deposits of AmTrust Bank. AmTrust did not pay a premium to assume the deposits.
Introduction
Rather than immediately commencing foreclosure proceedings, lenders and servicers (acting on behalf of the lender) are seeking the judicial appointment of receivers with greater frequency when commercial real estate workout negotiations fail to produve the desired results and the borrower is not otherwise prepared to "turn over the keys."