In his latest article for The Bankruptcy Strategist titled, “Credible Fraudulent Transfer Advocacy,” Schulte Roth & Zabel of counsel Michael L. Cook discusses how appellate courts are leveraging common sense when disposing of constructively fraudulent transfer appeals.

“Common sense is not so common,” said Voltaire in 1764. But our appellate courts continue to use common sense when disposing of constructively fraudulent transfer appeals, as recent decisions show. See, e.g., In re International Supply Co., 2024 WL 2813849 (7th Cir. June 3, 2024); (“[A] balance sheet can convey an unrealistic picture of a firm’s finances”; rejected lender’s argument that “sole legally permissible approach to defining solvency is the balance-sheet test”); In re Wade Park Land Holdings, LLC, 2024 WL 3024648, *4 (2d Cir. June 17, 2024)(“[T]he district court correctly concluded that the values stated … in the appraisals were not plausible when viewed in light of other allegations in the complaint — in particular the conduct of the parties and the inability [of the debtors’ principal] to refinance [the debtor’s property].”); In re The Mall at the Galaxy, Inc., 2024 WL 3688721 (3d Cir. Aug. 7, 2024) (debtor received no value from insider loan and pre-bankruptcy payment constructively fraudulent; multiple transactions collapsed; pre-judgment interest awarded on pre-bankruptcy loan repayment because defendant “able to use” funds “for over a decade.”); and In re White, 2024 WL 689232 (10th Cir. BAP Feb. 21, 2024) (“a true dollar-for-dollar exchange … almost always constitutes reasonably equivalent value”).

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During a roughly four-hour hearing on September 24, SEC Chair Gary Gensler and the other four SEC commissioners testified before the House Financial Services Committee. The hearing highlighted deep ideological rifts within the SEC, particularly around cryptocurrency regulation, and underscored the divide between the Republican and Democratic commission members. 

Schulte Roth & Zabel co-managing partner Marc Elovitz recently discussed the hearing with Pensions & Investments for their piece titled, “5 SEC commissioners head to Capitol Hill,” where he described the vast ideological disagreements among the five-member commission. “It used to be the case that most commission decisions, whether it be on a rule or enforcement action, were unanimous…but this has been a purely partisan split on issue after issue and (Peirce and Uyeda) have been issuing dissents, which is rare,” Marc stated.  

Disagreements were not limited to crypto but extended to disclosure mandates and public feedback incorporation into rule-making processes, showcasing fundamental differences in approaches within the SEC. 

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