Nevada Debtors Seek to Avoid and Recover $3,000,000 Allegedly Paid in “Dividends” and “Fees” in Alleged Litigation Finance Ponzi
May 3, 2022, Nevada – Debtors J & J Consulting Services, Inc. and J and J Purchasing, LLC have filed two adversary actions in their bankruptcy cases against ten defendants alleging, among other things, that the debtors were engaged in a “scheme to defraud” by selling personal injury settlements to investors.
The complaints allege that the debtors represented to the investors that “the plaintiffs in personal injury cases were expecting payments on their claims within 90 days but were willing to assign the payments to J&J Consulting in exchange for a fraction of the settlement proceeds to be paid immediately.” In return for the short-term funding, the principals of the debtors allegedly represented that “J&J would receive the entire settlement within 90 days, resulting in a substantial short-term return.” However, as contended in the complaint, “there were no personal injury settlements, no network of attorneys, and no investment” and that the principals used “funds received from the later Investment Contracts to repay investors who had preceded these later investors.”
The defendants in these cases include Mark A. Murphy and certain Nevada companies allegedly owned by him. The debtors alleged that Murphy provided accounting services to the debtors and also acted as their “promoter.” The defendants allegedly received at least $3,000,000 in “dividends” and “fees.”
By way of the complaint, the debtors seek to avoid and recover the alleged transfers made to the defendants as “actual fraud” and “constructive fraud” under federal and Nevada state law. The complaint also includes claims for “turnover and accounting”, “unfair trade practices”, “conversion”, “conspiracy to commit fraudulent misrepresentation/fraudulent concealment” and “injunctive relief.”
J & J Consulting Services, Inc. and J and J Purchasing, LLC v. Murphy et al. (In re J & J Consulting Services, Inc.), Bankruptcy Case Number: BK-22-10943-MKN, Adversary Proceeding No. 22-01070J & J Consulting Services, Inc. and J and J Purchasing, LLC v. Murphy et al. (In re J and J Purchasing, LLC), Bankruptcy Case Number: BK-22-10942-MKN, Adversary Proceeding No. 22-01069