632 F. App'x 937
10th Cir.2015Background
- In 2008 Arthur S. Wulf purchased 60,000 shares in Impact Payment Systems/Impact Cash for $60,000; Impact operated as a Ponzi scheme and redeemed Wulf’s stock in 2010 for $94,500, producing $34,500 in alleged Ponzi winnings.
- The SEC had filed a civil enforcement action against Impact and its controller; Gil A. Miller was the court-appointed receiver and sued to recover Wulf’s Ponzi winnings as fraudulent transfers.
- Wulf, a licensed attorney proceeding pro se, failed to comply with the district local rule to specifically controvert the receiver’s numbered facts; the district court therefore deemed the receiver’s factual statements (establishing Impact as a Ponzi scheme) admitted.
- The district court applied Utah’s Ponzi presumption and concluded Impact received no reasonably equivalent value for payments exceeding investors’ principal; it entered summary judgment for the Receiver for $34,500 plus interest.
- Wulf’s motions for summary judgment and for Rule 11 sanctions were denied; the district court awarded the Receiver attorney fees for defending the sanctions motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether payments to Wulf are avoidable as fraudulent transfers from a Ponzi scheme | Wulf: he was an equity investor who purchased stock and received a legitimate redemption/dividend, so he can keep his gains | Receiver: Impact was a Ponzi scheme; under the Ponzi presumption payments exceeding principal are fraudulent and not supported by reasonably equivalent value | Payments were avoidable; Wulf may retain only his original $60,000 principal, not the $34,500 gain |
| Whether Impact received reasonably equivalent value for the redemption | Wulf: returned stock had value; buyer paid $25M for business, so Impact wasn’t insolvent | Receiver: Ponzi schemes are insolvent by definition; the returned stock was virtually worthless | Court: Impact insolvent as a matter of law (Ponzi); no reasonably equivalent value for amounts over principal |
| Whether Wulf waived challenges by failing to dispute the receiver’s factual statements | Wulf: disputes characterization of Impact as a Ponzi scheme | Receiver: Wulf failed to comply with local rule and thus admitted the facts | Court: Wulf waived factual challenges; deemed facts admitted and reviewed de novo but in light most favorable to non-movant standard applied |
| Whether the district court abused its discretion denying Rule 11 sanctions and awarding receiver fees | Wulf: Receiver increased litigation cost, refused to settle in bad faith, and misapplied cases | Receiver: litigated reasonably; settlement conditioned on financial documentation; fees reasonable | Court: No abuse of discretion; sanctions denied and receiver awarded fees for defending the sanctions motion |
Key Cases Cited
- Sender v. Simon, 84 F.3d 1299 (10th Cir.) (definition of Ponzi scheme)
- In re AFI Holding, Inc., 525 F.3d 700 (9th Cir.) (investor in Ponzi scheme entitled only to original contribution)
- Perkins v. Haines, 661 F.3d 623 (11th Cir.) (no distinction between equity and debt holders for Ponzi-transfer rule)
- Klein v. Cornelius, 786 F.3d 1310 (10th Cir.) (Ponzi schemes insolvent as a matter of law; transferee's awareness not required)
- BancInsure, Inc. v. FDIC, 796 F.3d 1226 (10th Cir.) (summary judgment standard)