Ponzi Schemes And Avoidance Actions: 3 Issues

Law360, New York (March 7, 2011, 1:45 PM EST) -- In recent years, a number of investment arrangements have been exposed as alleged Ponzi schemes. Investors in such arrangements who redeemed all or some of their investments have been named as defendants in fraudulent transfer actions under federal bankruptcy law or under state law.

It is a defense to such fraudulent transfer claims under bankruptcy law (even claims involving actual fraud by the transferor) if the transferee provided “value” and acted in “good faith.” Under New York law, it is a defense if the transferee provided...
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