Limiting Good-Faith Fraudulent Transfer Defense — Again

The U.S. Court of Appeals for the Fifth Circuit, on March 11, 2015, held an advertising firm in a U.S. Securities and Exchange Commission receiver’s Texas fraudulent transfer suit liable for $5.9 million that it received in good faith from a Ponzi scheme debtor. Janvey v. The Golf Channel Inc., at *1 (5th Cir. March 11, 2015). In reversing the district court, the Fifth Circuit explained that the defendant’s “services furthering a debtor’s Ponzi scheme provide no value to the debtor’s creditors.” Id. (citing Warfield v. Byron, 436 F.3d 551, 560 (5th Cir. 2006) (held, commissions paid to broker in exchange for obtaining new investments into a Ponzi scheme are voidable even when broker unaware of fraud)). In this article, SRZ partner Michael L. Cook discusses the Fifth Circuit’s decision.