Perkins v. Haines
661 F.3d 623
| 11th Cir. | 2011Background
- International Management Associates and related entities operated a Ponzi scheme; bankruptcy filings under Chapter 11 consolidated; Plan Trustee William F. Perkins appointed and pursued avoidance/recovery actions; trustee sought to avoid investor distributions as fraudulent transfers under 11 U.S.C. §548(a)(1)(A) and state law; investors asserted §548(c) value defense claiming transfers were for value in exchange for the debt; bankruptcy court denied partial summary judgment, upholding value defense; Eleventh Circuit affirms the bankruptcy court’s denial and approves AFI Holding-based reasoning; investors held equity interests in the insolvent entities and received principal and purported profits from the Debtors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether transfers to investors in a Ponzi scheme can be for value under §548(c). | Perkins argues transfers are not value beyond principal in Ponzi context. | Investors contend some transfers constitute value up to the principal under restitution claims. | Transfers up to principal were for value; AFI Holding applied. |
| Whether AFI Holding controls the outcome for equity-investor transfers in a Ponzi scheme. | Trustee urges rejection of AFI Holding’s rule for equity claims. | AFI Holding governs reinstatement of value for restitution claims in Ponzi schemes. | AFI Holding applies; equity interests do not defeat value defense. |
| What amount constitutes value in Ponzi-scheme transfers to investors who hold equity interests. | Restitution claim supports value for principal only. | Any transfers up to principal amount satisfy value; excess is not for value. | Transfers up to the principal amount are for value; fictitious profits exceed value and may be recoverable. |
Key Cases Cited
- AFI Holding, Inc. v. Andrews, 525 F.3d 700 (9th Cir.2008) (restoration of principal in Ponzi scheme case treated as value for §548(c))
- Donell v. Kowell, 533 F.3d 762 (9th Cir.2008) (payments up to principal satisfy restitution claim; value defense recognized)
- In re United Energy Corp., 944 F.2d 589 (9th Cir.1991) (investor claims and value principles in transfers)
- In re M & L Bus. Mach. Co., Inc., 84 F.3d 1330 (10th Cir.1996) (restitution claim-based value in fraud context)
- Roco Corp., 701 F.2d 978 (1st Cir.1983) (equity redemptions in insolvent entities and value analysis)
- Schafer v. Hammond, 456 F.2d 15 (10th Cir.1972) (equity redemptions—not necessarily value when insolvent)
- Lytle v. Andrews, 34 F.2d 252 (8th Cir.1929) (insolvent corporations paying shareholders with diminished value)
- M.V. Moore & Co. v. Gilmore, 216 F. (4th Cir.1914) (early equity/insolvency value considerations)