In Re: First Farmers Financial Litigation, 1:14-cv-07581

Background

This case arises from a Ponzi scheme run by Nikesh Patel through First Farmers Financial, LLC (FFF); Patel pled guilty to wire fraud. The Overall Receiver seeks recovery from BCM High Income Fund, LP and BCM High Income GP, LLC (collectively, BCM) for transfers tied to USDA‑guaranteed loans.
BCM buys and sells the guaranteed portions of USDA/SBA loans in the secondary market; it typically conducts limited lender/borr0wer due diligence and did not routinely confirm loans with the USDA or require Certificates of Incumbency.
BCM purchased several loans from FFF, including three fictitious (fraudulent) loans and multiple legitimate loans; FFF (and a special‑purpose entity FFF Guaranty Fund I, LLC) later repurchased the fraudulent loans.
The Overall Receiver alleges actual and constructive fraudulent transfers under the Florida Uniform Fraudulent Transfer Act (FUFTA) and unjust enrichment based on payments and repurchases totaling over $20 million, and moved for a preliminary injunction to freeze BCM distributions and constrain transfers.
The district court evaluated whether BCM was an in‑good‑faith transferee (i.e., whether BCM was on inquiry notice of FFF’s fraud), whether the Receiver showed irreparable harm (risk of asset dissipation/judgment‑proofing), and the balance of harms/public interest.

Issues

Issue	Receiver's Argument	BCM's Argument	Held
Whether Receiver is likely to succeed on FUFTA claims (good‑faith defense/inquiry notice)	BCM’s conduct (willingness to "hold" loans, lax diligence, unusual 90%/large loans, repayment delays, use of SPE) would have put an ordinary dealer on inquiry notice	BCM followed industry practice and Good Delivery Requirements; 90% guarantees and $10M loans were possible; holding loans and quick funding are not per se suspicious	Receiver met the low threshold (better‑than‑negligible likelihood) but success is far from certain; evidence is mixed and Receiver lacks expert corroboration; claim survives threshold but is not ironclad
Whether Receiver showed irreparable harm warranting injunction (asset dissipation / judgment proofing)	BCM is losing equity and may deplete assets; injunction necessary to preserve estate recovery	BCM is financially healthy (partner capital, fund gains); Receiver’s showing is speculative	Receiver failed to make a clear showing of irreparable harm or inadequacy of legal remedy; injunction denied
Whether balance of hardships and public interest favor injunctive relief	Freezing BCM preserves recovery for creditors	Injunction would severely hamper ordinary business operations and burden the court; public interest favors functioning secondary market	Even if Receiver showed minimal likelihood of success, balance of harms tips to BCM; broad operational restraints would be inappropriate
Unjust enrichment as independent basis for relief	Seeks disgorgement of > $20M if fraudulent transfer claim succeeds	If defendants provided value (return of principal), unjust enrichment claim fails; recovery might be limited to false profits	Court did not decide unjust enrichment separately; if fraudulent‑transfer claim fails, the unjust enrichment claim for full sum would likely fail because defendants gave value for returned principal

Key Cases Cited

Whitaker ex rel. Whitaker v. Kenosha Unified Sch. Dist. No. 1, 858 F.3d 1034 (7th Cir. 2017) (preliminary injunction is extraordinary and requires clear showing).
Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7 (2008) (standard for issuing preliminary injunction).
D.U. v. Rhoades, 825 F.3d 331 (7th Cir. 2016) (preliminary injunction elements and need to show likelihood of success).
Turnell v. CentiMark Corp., 796 F.3d 656 (7th Cir. 2015) (sliding‑scale balancing of injunction factors).
Perkins v. Haines, 661 F.3d 623 (11th Cir. 2011) (in Ponzi schemes, investors provide reasonably equivalent value only up to return of principal; false profits recoverable).
Wiand v. Lee, 753 F.3d 1194 (11th Cir. 2014) (transfers made in furtherance of a Ponzi scheme establish actual intent under FUFTA).
Donell v. Kowell, 533 F.3d 762 (9th Cir. 2008) (receiver may recover fictitious profits in Ponzi scheme contexts).
Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995) (treatment of value given in fraudulent‑transfer/Ponzi contexts).