AMENDED MEMORANDUM OPINION AND ORDER
This appeal is from a judgment of the United States Bankruptcy Court for the Middle District of North Carolina. Plaintiff Charles M. Ivey, III (“Plaintiff’) is appealing the Bankruptcy Court’s December 8, 2014 Order in which the Bankruptcy Court granted Defendant First Citizens Bank and Trust Company’s (“Defendant”) summary judgment motion. For the reasons set forth below, the Bankruptcy Court’s grant of summary judgment will be affirmed.
I. INTRODUCTION
This case arises out of the bankruptcy of James Edward Whitley (“Debtor”), who was engaged in a Ponzi scheme
Plaintiff timely appealed the Bankruptcy Court’s grant of summary judgment to this court on December 18, 2014. (Notice of Appeal (Doc. 1).) Plaintiff filed a Brief in. support of his appeal on March 11, 2015. (Doc. 16.) Defendant filed a Brief (Doc. 18) on April 10, 2015, and Plaintiff filed a Reply (Doc. 19) on April 27, 2015. This action is thus ripe for review.
II. LEGAL STANDARD
. This appeal is brought pursuаnt to 28 U.S.C. § 158(a) and Rule 8001 of the Federal Rules of Bankruptcy Procedure. On appeal from the Bankruptcy Court, this court functions as an appellate court and reviews the Bankruptcy Court’s findings of fact for clear error and conclusions of law de novo. In re Merry-Go-Round Enters., Inc.,
III. FACTUAL BACKGROUND
As part of a Ponzi scheme, Debtor utilized a personal bank account in his own name at one of Defendant’s branch banks to deposit funds. (Notice of Appeal (Doc. 1) at 5-6.) During the two years preceding the filing of involuntary Chapter 7 bankruptcy proceedings against Debtor, Debtor’s account at Defendant bank received eleven deposits at issue, six checks and five credits, via wire or telephone transfer, all of which allegedly relate to
[r]eject[ed] the proposition that the deposit of the checks by or on behalf of the Debtor and the subsequent processing of the checks and wire transfers did not result in transfers of property of the Debtor to the [Defendant], [but] the court agree[d] that the transfers to the [Defendant] that did occur involving the chеcks and money orders did not diminish the bankruptcy estate.
(Mem. Op. (Doc. 1) at 7.) For this reason, the Bankruptcy Court granted summary judgment in favor of Defendant.
Plaintiff filed the present appeal and submitted a single issue for this court to consider:
Whether, in order to survive summary judgment on his fraudulent transfer claims, the appellant-trustee must prove that the transfers of checks or wire transfers that were made to First Citizens diminished the assets of the bankruptcy estate?
(Br. of Appellant (Doc. 16) at 14.) Plaintiff goes on to argue that:
In requiring a diminution of estate assets, the Bankruptcy Court fashionеd a new implied element, which is totally unsupported by the statutory text, and contrary to established Fourth Circuit precedent.
(Id. at 20.)
IV. ANALYSIS
This court concludes that the Bankruptcy Court did not err in citing the lack of diminution of the estate to support the grant of summary judgment.
In outlining what constitutes an avoidable transfer, Bankruptcy Code § 548(a)(1)(A), Fraudulent transfers and obligations, provides:
The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation tо or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted;....
Given this analysis of § 548(a)(1)(A), the Bankruptcy Court discussed why these transfers nonetheless do not qualify as fraudulent transfers under § 548(a)(1)(A). In explaining its grant of summary judgment, the Bankruptcy Court found that
[T]he transfers to the Bank in this case resulting from the deposits of the chеcks and wire transfers were not fraudulent transfers because ... they did not diminish the Debtor’s estate nor place the funds involved in the transfers beyond the reach of creditors. The critical facts underlying this result are that (1) the transfers to the Bank made or caused to be made by the Debtor were to a bank account belonging to the Debtor and (2) such account was an ordinary checking account in which the funds in the account were readily available to the Debt- or.
(Mem. Op. (Doc. 1) at 8.) The transfers that Plaintiff wants avoided pursuant to § 548 are listed in Defendant’s summary judgmеnt brief, (Def.’s Mem. of Law in Supp. of Mot. for Summ. J. (Doc. 6) at 2), and as found by the Bankruptcy Court, are all credits to Debtor’s checking account at Defendant’s bank. (Mem. Op. (Doc. 1) at 6.) The transfers in question do not cause any diminution of the estate and would otherwise be available for administration.
Section 101 of the Bankruptcy Code defines the term “transfer” to include “an interest of the debtor in property.” 11 U.S.C. § 101(54)(D)(ii).
In reworking the Bankruptcy Code, Congress sought to make “[t]he definition of transfer [ ] as broad as possible,” drafting it to include “any transfer of an interest in property,” including “[a] deposit in a bank account or similar account.” S.Rep. No. 95-989, at 27 (1978), 1978 U.S.C.C.A.N. 5787, 5813; see also § 101(54)., Thus, Debtor here, who deposited into his own account, did effectuate a transfer undеr § 101 and, due to the Ponzi presumption, is deemed to have the requisite fraudulent intent under § 548. However, § 548 appears to require more, as Congress drafted § 548 to also require a fraudulently intended transfer “of an interest of the debtor in property.” § 548, While the Code itself does not define the phrase “interest of the debtor in property,” the courts have. “The phrase ‘interest of the debtor in property’ ‘is best understood as that property that would have ■ been part of the estate had it not been transferred before the commencement of bankruptсy proceedings.’ ” In re Beacon-Vision, Inc.,
A bankruptcy trustee can recover for the bankruptcy estate transfers made by a debtor by demonstrating the transferred property was “of an interest of the debtor in property.” “[A]ny funds under the control of the debtоr, regardless of the source, are properly deemed to be the debtor’s property, and any transfers that diminish that property are subject to avoidance.” A debtor must have exercised “sufficient control over the funds to warrant a finding that the funds were the debtor’s property.” ... The purpose of avoiding fraudulent transfer actions is to prevent a debtor from diminishing property that properly belongs to all creditors.
In re Pearlman,
Consequently, the parties and this court have addressed this issue primarily as an issue of diminution of the estate, and this court is of the opinion that such a purpose is reflected in the statutory construction of § 548. Because the statute requires not just a “transfer,” § 101, (i.e., a transfer by a debtor of currency from a safe in his home to a deposit bank account would be a transfer, § 101; S.Rep. No. 95-989, at 27 (1978)), but a “transfer of an interest of the debtor in property,” § 548, a transfer would not necessarily be a fraudulent conveyance under § 548. This construction simply recognizes that a transfer is not subject to avoidance if it did not or could not diminish the estаte, reflecting that the interest of the debtor in such property did not change. Thus, because the Debtor here merely effectuated transfers to himself within the estate, the § 548 phrase “interest of the debtor in property” eliminates his actions from its scope, since his actions had no actual or potential diminutive effect on the bankruptcy estate. See In re BeaconVision,
In addition to the statutory basis, the Bankruptcy Court’s grant of summary judgment based on a finding that there was no diminution of the estate also recognizes past bankruptcy practice as stated in New York Cty. Nat’l Bank v. Massey,
Consideration of actual or potential diminution of the estate recognizes that “[wjhether the goal is to protect some creditors, as in the case of § 547, or all creditors, as in the case of § 548, only asset transfers that may have actually harmed creditors may be avoided.” Bear, Stearns See. Corp.,
Although the Fourth. Circuit has not explicitly addressed this diminution issue,
[Plaintiff] argues that “depletion of the estate” is not an element of proof in the fraudulent transfer statute. Although there is no formal “diminution of estate” requirement in the statutory language, the purpose of fraudulent transfer recovery is to prevent a debtor from putting assets otherwise available to its creditors out of their reach: “In our quest to understand fraudulent transfer liability, we often overlook first principles. At its core, fraudulent transfer law is a debt-collection device and not a revenue generating tool; its mission is to prevent the unjust diminution of the debtor’s estate.”
The “diminution of estate” or “depletion of the estate” concept usually arises in connеction with preferences.... The purpose of fraudulent transfer law is to protect creditors from last-minute diminutions of the pool of assets in which they have interests.
Id. at 717 (citations omitted).
Plaintiff relies on several decisions to support his contention that “diminution of the estate is not an element of a fraudulent transfer claim, and was therefore irrelevant to the Bankruptcy Court’s analysis.” (Br. of Appellant (Doc. 16) at 24.) This court is not persuaded by Plaintiffs reliance on these cases in support of a proposition that a transfer that does not diminish the estate, as on these present facts, is nonetheless a fraudulent transfer under § 548.
Plaintiff cites In re Model Imperial, Inc.,
Plaintiff also cites two Fourth Circuit cases for “reject[ing]” the diminution of estate prong of fraudulent transfer: Tavenner v. Smoot and In re Mahaffey. (Br. of Appellant (Doc. 16) at 27-29.) This court doеs not agree with Plaintiffs contention that these cases do not take into account the effect on the estate when considering fraudulent transfer claims.
Tavenner v. Smoot,
Further, the transfers at issue in Taven-ner involved exemptible property under Virginia law. The defendant argued those transfers could not qualify under § 548 because “it is impossible to hinder, delay or defraud creditors by transferring property to which the creditors were not entitled in the first place.” Id. at 407. The Fourth Circuit agreed with the majority position that transfers of exempt property are amenable to avoidance actions, stating that “[njothing in § 548 indicates that a trustee must establish that a fraudulent conveyance actually harmed a creditor,” id., and recognizing that “if a debtor enters into a transaction with the express purpose of defrauding his creditors,- his behavior should not be excused simрly because, despite the debtor’s best efforts, the transaction failed to harm any creditor.” Id. (citations omitted).
However, more pointedly to this case, in Taverner's rejection of the “no harm, no foul” approach, the Fourth Circuit focused on the fact that:
Under a statutory scheme in which all property is presumed to be part of the bankruptcy estate, and no property is exempt until such time as the debtor claims an exemption for it, creditors can be harmed by transfers of potentially exempt property because it is not a foregone conclusion that such property will be exempt from the estate.
Id.
Section 548, as analyzed by the Fourth Circuit in Tavenner, does not require actual harm to establish a fraudulent transfer.
[T]he “no harm, no foul” approach seemed more appropriate under the old Bankruptcy Act, in which exempt property was not part of the bankruptcy estate. Under the new Bankruptcy code, in contrast, all property, including potentially exempt property, is part of ■ the estate until the debtor claims an exemption. Consequently, a transfer of potentially exempt property could harm creditors.
In re Mahaffey, No. 95-2411,
Thus, given the text of § 548, prior bankruptcy practice, and corresponding Fourth Circuit precedent, Plaintiff has not persuaded this court that the Bankruptcy Court’s consideration of no actual or рotential diminution of the estate was improper.
In the alternative, Plaintiff asserts that the bankruptcy estate was in fact diminished by the transfers at issue. (Br. of Appellant (Doc. 16) at 29-30.) This court does not find this argument persuasive on the facts present.
In a case still cited by courts and referenced by the Bankruptcy Court here, the United States Supreme Court addresses the impact of a bank deposit on an estate in the bankruptcy context.
As we have seen, a deposit of money to one’s credit in a bank does not operate to diminish the estatе of the depositor, for when he parts with the money he creates at the same time, on the part of the bank, an obligation to pay the amount of the deposit as soon as the depositor may see fit to draw a check against it. It is not a transfer of property as a payment, pledge, mortgage, gift, or security.
New York Cty. Nat’l Bank v. Massey,
Teleservices Group makes clear ... why Massey dealt only with a preference under the old Act, back when diminution was still a recognized element. The Massey decision is simply not applicable anymore when addressing issues under the current Bankruptcy Code’s fraudulent transfer provisions.
(Id. at 23.) Defendant counters that:
The Teleservices court ultimately concluded that Massey’s analysis of preferential set-offs had become “an anachronism” because the Bankruptcy Code addressed such setoffs by adding 11 U.S.C. § 553(b). Notably, however, it did not, as the Trustee suggests, re-jeet as improper or no longer valid Massey’s determination that a bank aсcount deposit does not diminish the bankruptcy estate.
(Br. of Appellee (Doc. 18) at 29-30.) This court is not persuaded that Plaintiffs argument regarding Massey’s inapplicability makes Massey invalid'for the proposition upon which the Bankruptcy Court relied.
In Teleservices, the transfer in question placed funds in the benefit of the depositor and the defendant bank because an agreement allowed the bank to use the funds to offset debt at the bank. Teleservices,
Indeed, diminution of the estate is not even an issue when the liаbility of a transferee under Section 550 is being assessed. But then, this court sees no reason why it should be a factor given that diminution of the estate is relevant only with respect to the initial transfer and then only as to its avoidability.
Teleservices,
In the present action, the Ponzi presumption allows a court to infer actual intent of fraud, but it does not negate the relevance of actual or potential diminution of the estate to § 548 analysis. Further, this court finds that Debtor’s deposit of funds into an unrestricted demand checking account neither actually diminished nor had the potential to diminish the estate. Accordingly, the Bankruptcy Court’s grant of summary judgment on the fraudulent transfer claims will be affirmed.
V. CONCLUSION
For the reasons set forth herein, IT IS HEREBY ORDERED that the Bankruptcy Court’s grant of summary judgment (Doc. 1) is AFFIRMED.
. The Memorandum Opinion and Order is amended to correct a typographical error.
. "The term Ponzi scheme is the namesake of Charles Ponzi, a renowned Boston swindler, and refers to a phony investment plan in which monies paid by later investors are used to pay artificially high returns to the initial investors, with the goal of attracting more
. As set out in United States v. Wachovia Corp.:
Factoring is a process by which business enterprises acquire more capital and keep their оwn capital turning over faster. A factor purchases the accounts receivable without recourse but at a discount; and then collects the accounts. This enables the factor's customer to get his money out of his accounts receivable without delay. Although not strictly a lending business, it serves a credit-related purpose by putting the factor's assets to work instead of requiring borrowing from other sources by the factor's customers.
. All citations in this Memorandum Opinion and Order to documents filed with the court refer to the page numbers located at the bottom right-hand corner of the * documents as they appear on CM/ECF.
. Defendant notes a discrepancy in the number of deposits at issue on this appeal. (Br. of Appellee (Doc. 18) at 12 n. 1.)
The Bankruptcy Court ruled on the eleven deposits identified in FCB’s [First Citizens Bank and Trust] summary judgment brief. Appellant's Brief identifies a twelfth deposit, a cash deposit for $2000 made on 21 January 2009. Because this deposit was not identified or included in the Bankruptcy Court’s decision, it should not be considered on appeal.
(Id. (citations omitted).) Because this court's decision does nоt depend on specific deposits, this court finds no need to resolve this discrepancy.
. Plaintiff does argue that the transfers diminished the estate. This court disagrees for reasons explained hereafter.
. In full, § 101(54) provides:
The term "transfer” means—
(A) the creation of a lien;
(B) the retention of title as a security interest;
(C) the foreclosure of a debtor's equity of redemption; or
(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with—
(i) property; or
(ii) an interest in property.
11 U.S.C. § 101(54)(A)(D) (2012).
. The Fourth Circuit provided extensive citations in support. PSINet,
. Although Begier v. Internal Revenue Service analyzed § 547(b), the terminology in § 548 is the same and thus the Court's holdings regarding "an interest of the debtor in property” apply to both sections equally. See Bear, Stearns Sec. Corp. v. Gredd,
Notably, in In re French, the Fourth Circuit also applies Begier's interpretation of "interest of the debtor in property” in § 547 to § 548, but In re French is distinguishable from the matter at hand as it addressed foreign real property in the context of § 548(a)(1)(B). In re French,
. However, the Fourth Circuit addresses the general issue of what an interest of the debtor
. In Tavenner, the Fourth Circuit first discusses its rejection of the "no harm, no foul” approach and then discusses specific intent and harm under § 548 in the immediately following section. See Tavenner,
. Notably, Tavenner also analyzes how the transfer of this property is a removal of property from the estate, notwithstanding its ex-emptible status, because, as quoted supra, all property remains part of the estate until the debtor actually claims an exemption. See Tavenner,
. Albeit in a different context, the Supreme Court noted the relеvance of prior bankruptcy to current bankruptcy code. “When Congress amends the bankruptcy laws, it does not write 'on a clean slate’ Hall v. United States, 566 U.S. -, ,
. Notably, in Teleservices, a part of the transfers were deposits into bank accounts that themselves served as security for the line of credit that the defendant bank extended to debtor. See Teleservices,