454 B.R. 317
Bankr. S.D.N.Y.2011Background
- BLMIS operated a Ponzi scheme under SIPA; trustee Picard seeks to recover transfers to Cohmad and related defendants.
- Cohmad coordinated referrals to BLMIS; about 20% of active BLMIS accounts were Cohmad-referred.
- Commissions were paid to Cohmad and then funneled to Cohmad Representatives via a dual bookkeeping system.
- Withdrawals labeled as Fictitious Profits and Initial Transfers of Commissions are central to the trustee's claims.
- Complaint contains detailed Exhibits identifying Withdrawals, Initial Transfers, and subsequent transfers to representatives.
- Defendants move to dismiss; court must evaluate both actual and constructive fraudulent transfer theories under Code and NYDCL.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of pleading actual fraud | Trustee pleads transfers with Rule 9(b) particularity and Ponzi presumption. | Transfers lack specific fraudulent intent allegations against all movants. | Counts alleging actual fraud pleaded sufficiently. |
| Constructive fraud pleading standard | Robust Rule 8 notice suffices for constructive fraud claims. | Constructive fraud claims require no heightened Rule 9(b) pleading. | Counts Three, Five, Six, Seven adequately pled under Rule 8(a). |
| Fraudulent transfer look-back period under NYDCL/Code | Six-year look-back from filing date applies; discovery rule may extend further. | Look-back should run from the complaint filing, not the SIPA filing date. | Transfers back to December 11, 2002 timely; six-year look-back upheld. |
| Discovery rule standing under NYDCL § 276/choosing category of creditors | Category of unsecured creditors can invoke discovery rule for relief. | Need specific unsecured creditor standing to invoke discovery rule. | Trustee properly alleged discovery-rule claims; standing discussion reserved for later. |
| Subsequent transfers from Cohmad Representatives | Cohmad Representatives are liable for transfers received as subsequent transferees. | Arguments rely on innocent-broker Churchill precedent; not enough for liability here. | Trustee adequately pleaded subsequent-transfer liabilities; dismissals denied. |
Key Cases Cited
- In re Dreier LLP, 2011 WL 2412581 (Bankr.S.D.N.Y. 2011) (Ponzi presumption supports fraud intent; value defenses later)
- Donell v. Kowell, 533 F.3d 762 (9th Cir. 2008) (payments in excess of principal may be voidable as fraudulent transfers)
- Churchill Mortg. Inv. Corp., 256 B.R. 664 (Bankr.S.D.N.Y. 2000) (value from brokers depends on innocence; Churchill I)
- Churchill Mortg. Inv. Corp. II, 264 B.R. 303 (Bankr.S.D.N.Y. 2001) (reiterates brokers' value/innocence distinction; affirmed value limits)
- In re Bayou Grp., LLC, 439 B.R. 334 (Bankr.S.D.N.Y. 2010) (disallowance and value considerations in Ponzi context)
- Merkin v. Picard (In re BLMIS), 440 B.R. 243 (Bankr.S.D.N.Y. 2010) (SIPA/Bankruptcy claims overview and avoidance powers)