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Home Case Studies Lawsuit against Fund Management Company Dismissed for No Payment

Lawsuit against Fund Management Company Dismissed for No Payment


Debtors were raising money through investments, and the defendant was hired under an
agreement to render standard fund management services to the debtors. Defendant’s services
included preparing subscription agreements, handling daily fund accounting and administration,
fund-level reporting, and preparing statements for investors.

The Trustee for debtors sued the defendant (our client) for alleged violation of New York Debtor
and Creditor Law §273, §274, and §275. The Trustee’s primary allegation was that the debtors
allegedly did not receive a fair consideration or a reasonably equivalent value for the payments
made to the defendant.

We showed that the payments were made pursuant to the terms of the agreement between the
parties in accordance with the amounts agreed upon between the parties. We prepared a position
statement that demonstrated that all the transfers were made in consideration of the services
provided by the defendant. The value of the defendant’s services was undoubtedly fair
consideration in exchange for the transfers made by the debtors. We successfully proved that the
defendant’s services satisfied the requirement of reasonably equivalent value under section
548(a)(1)(B) of the Bankruptcy Code.

Our position statement established that the Trustee cannot avoid and recover the transfers from
the defendant. The Trustee agreed to surrender the clawback action for no payment.


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