Seattle Trustee Alleges Debtor Books Altered, Seeks 1.4m in Alleged Fraudulent Transfers

June 06, 2022, US Bankruptcy Court for the Western District of Washington – Edmund J. Wood, solely in his capacity as Chapter 7 Trustee (“Trustee”) of the bankruptcy estate of the Hot Pot Seattle, LLC (“Debtor”) sues Defendant BTV Investment, LLC (“BTV”) to clawback $1.4 million under ‘fraudulent’ transfer claims. 

The complaint alleges that the Defendant has at all relevant times been an “insider” and in control of the Debtor since it allegedly owns 97% of the Debtor. 

The Trustee avers that the Defendant owes the Debtor $1,405,000.00 on alleged outstanding prepetition loans made by the Debtor to Defendant. The trustee claims that the Debtor’s books were allegedly altered to reclassify the loan owed by the Defendant to a distribution, effectively eliminating a $1,405,000 asset from the Debtor’s books, approximately 12 days before the bankruptcy petition date.

The Trustee consequently seeks to avoid the transfers made to the Defendants within two years prior to the bankruptcy petition date as “fraudulent transfers” under 11 U.S.C. §548. The Trustee additionally prays the Court to set aside the transfers made to the Defendant within four years of the bankruptcy petition date as “fraudulent conveyances” under 11 U.S.C. §544 and RCW 19.40.010. 

Edmund J. Wood, Trustee v. BTV Investment LLC (In re Hot Pot Seattle, LLC), AP No. 22-1029, US Bankruptcy Court for the Western District of Washington. 

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