Cachet Financial Services Fights to Recover $500K From Axos Bank, Alleges Withholding Stolen Property From Owner Is Violation of California Penal Code Section 496(a)
January 19, 2022, Central District of California – Reorganized Debtor Cachet Financial Services fka Cachet Banq., Inc., files a legal action against Defendant Axos Bank for avoidance and recovery of alleged preferential and fraudulent transfers, unjust enrichment, conversion, and violation of Cal. Penal Code § 496(a).
The facts alleged in the complaint are: Before the petition date, Cachet contracted with hundreds of payroll processing companies under remarketer agreements to provide payroll ACH transaction services. These companies then contracted with employers to provide services to meet the employers’ payroll needs. MyPayrollHR LLC was one such remarketer client of Cachet, and Michael Mann controlled MyPayrollHR LLC. Further, Mann also controlled an entity named FocalPoint Group, LLC (FPG), and FPG had a bank account at Axos.
The complaint argues that Michael Mann allegedly defrauded Cachet, and as a result, Axos received $574,758.15 without providing any benefit or reasonably equivalent value to Cachet. Specifically, the Trustee argues that Mann uploaded batch files to Cachet’s server that allegedly caused Cachet’s settlement account to credit the Axos account in three separate amounts of $188,421.13, $165,743.97, and $220,593.05 for a total of $574,758.15. Accordingly, the complaint contends that Cachet may avoid the alleged fraudulent transfers and recover the value of the transfers for the benefit of the estate under §§ 544, 548, 550 and 551, and California Civil Code §§ 3439.04, 3439.05, 3439.07 and 3439.09.
Next, the Trustee claims that Cachet did provide Axos with proof of Mann’s alleged fraud, including that Mann pleaded guilty to various federal crimes against Cachet that resulted in the transfer of the alleged funds from Cachet to Axos, and demanded that Axos return the alleged funds, but Axos allegedly refused to return them. To this, Axos allegedly contends that it is entitled to retain and withhold property that it knows was stolen from Cachet as repayment or partial repayment of FPG’s debt to Axos. To this, the Trustee argues that withholding stolen property from the owner is a violation of California Penal Code section 496(a)
Accordingly, the Trustee seeks judgment for $574,758.15 and three times its actual damages and costs of suit $1,724,274.45 in its favor and against Axos under California Penal Code section 496(c).
In re Cachet Financial Services, Case No. 2:20-bk-10654-VZ