2nd Circ. Madoff Ruling Is A Win For Asset Recovery Trustees

By Robert Gayda, Catherine LoTempio and Andrew Matott (November 22, 2021, 5:14 PM EST) -- Sections 548 and 550 of the Bankruptcy Code incorporate an affirmative defense to alleged fraudulent transfers if a transferee, among other things, took the transfer in good faith.

One of the questions that arises when a transferee seeks to utilize this defense is what exactly constitutes good faith.

One standard, the inquiry notice standard, "requires knowledge of suspicious facts that need not suggest a 'high probability' of wrongdoing but nonetheless [are] sufficient to induce a reasonable person to investigate,"[1] according to U.S. Circuit Judge Richard Wesley who quoted U.S. Supreme Court precedent.

Another, the willful blindness standard, requires a person who "takes...

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