Assessing Fraud: Insights from Selected Voidable Transfer-Related Matters

Michael Vitti and Zain Saeed discuss the need to assess fraud's effect on a debtor's financial condition, specifically in situations where an analysis of alleged fraud can be relatively straightforward. Voidable transfer-related lawsuits can be influenced by hindsight because the debtor filed for bankruptcy, and the case of VFB v. Campbell Soup Co. illustrates how a defendant successfully used hindsight to draw a line in the sand after the transfer date, which retrojection of the debtor's bankruptcy filing could not cross. Another key case is Crescent, where the court deviated from the standard treatment by limiting recovery to just nonbank creditors; this case indicates that all contemporaneous market data is unreliable when some creditors are allegedly defrauded, but others are not. The contemporaneous indicators of solvency should be reassessed given the new information related to the alleged fraud for the innocent creditors, but not for the complicit creditors.