FILED
JUN 27 2023
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NV-23-1030-BGC
WELSCORP, INC.,
Debtor. Bk. No. 19-18056-ABL
STEVEN LORE, Adv. No. 21-01175-ABL
Appellant,
v. MEMORANDUM∗
LENARD SCHWARTZER, Chapter 7
Trustee,
Appellee.
Appeal from the United States Bankruptcy Court
for the District of Nevada
August B. Landis, Chief Bankruptcy Judge, Presiding
Before: BRAND, GAN, and CORBIT, Bankruptcy Judges.
INTRODUCTION
Appellant Steven Lore appeals an order granting appellee, chapter 7 1
trustee Lenard Schwartzer ("Trustee"), summary judgment against him under
§§ 544, 548, 2 and 550 and Nevada law, NRS § 112.180(1)(a). Trustee sought to
∗ This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all "Rule" references are to the Federal Rules of
Bankruptcy Procedure, and all "NRS" references are to the Nevada Revised Statutes.
2 To the extent the bankruptcy court granted relief under § 548, it erred. Trustee did
not seek relief under § 548 in his complaint, and none of the transfers to Lore occurred
1
avoid and recover the debtors'3 actual fraudulent transfers to Lore in
furtherance of an alleged Ponzi scheme. Because Lore failed to establish that
any genuine issue of material fact existed for trial, particularly whether the
debtors were running a Ponzi scheme, the bankruptcy court did not err in
granting Trustee summary judgment and entering a judgment against Lore
for $227,565.16. Accordingly, we AFFIRM.
FACTS
A. Events leading to the adversary complaint against Lore
The relevant facts are essentially undisputed. From August 2014 until
shortly before creditors filed their involuntary chapter 7 petitions on
December 20, 2019, debtors Welscorp, Inc. and its affiliates and principals
(collectively, "Debtors") operated an investment scheme that offered investors
250% to 600% returns from a pooled investor fund used to bet on sporting
events. Debtors' principals, John F. Thomas, III (aka Jonathan West, John
Rodgers, John Frank, and John Marshall) and Thomas Becker, claimed to
have created a proprietary sports betting algorithm that was highly accurate
in predicting the outcome of sporting events. 4 Thomas and Becker, through
within two years of the petition date. However, such error was harmless since the relevant
transfers occurred within four years of the petition date and relief was warranted under
Nevada law and § 544(b)(1).
3 Debtors include several entities and their principals: Welscorp, Inc.; Einstein
Sports Advisory Ltd.; QSA LLC; Wellington Sports Club LLC; Vegas Basketball Club LLC;
Vegas Football Club LLC; Boston Biometrics LLC; Sports Psychometrics LLC; ESA Ltd.;
No-More-Bad-Hires, Inc.; John F. Thomas, III, and Thomas Becker.
4 In 1991, Thomas and Becker were convicted of felony money laundering and
conspiracy arising from another fraudulent scheme. Thomas used the alias "Jonathan
West" during the time Debtors ran their sports betting investment scheme.
2
the Debtor entities and the services of their broker-agents, raised at least $29.5
million from 600 investors in more than 40 states with their "low-risk, high-
yield" sports betting investment scheme. The individual investors deposited
amounts ranging from less than $10,000 to over $500,000. Debtors did not do
any vetting of their investors to determine if they were accredited and could
survive a financial loss. Many investors were unsophisticated and placed a
substantial percentage of their net worth (including savings and retirement
accounts) with Debtors.
Debtors had more than 150 brokers and agents. Each broker signed a
"sports investment broker agreement" agreeing to "promote, market, and sell"
the investor agreements in return for a certain percentage of front-end and
back-end commissions. For every agent a broker brought in, the broker
received a certain percentage of the agent's commissions as well.
Debtors promised their investors "absolute security and instant
liquidity," compounding returns that grow "a quadrillion times faster" than
Warren Buffet's investments, or total growth of funds "a quintillion-fold". The
investor agreements set forth how Debtors would grow the investor's initial
investment to a target amount. Once the target was reached, the investor
could cash out and get 50% of the target amount; Debtors would get the other
50%. An investor could also choose to roll over some or all of the earnings
into a new agreement.
Prospective investors were lured into investing through personalized
access to a website that would provide them with "demonstrations" of how
3
their potential investment would grow over time. Once committing money to
Debtors, the investors' login credentials allowed them to monitor bets and
track their individual "winnings" online.
The websites, however, contained incorrect, falsified, or mismanaged
accounting information. For example, on February 11, 2017, investors were
shown that their accounts increased by $5,344,262, but betting slips from that
day showed they earned only $105,782.50. On May 12, 2018, investors were
shown that betting generated $60.5 million in profits, but betting slips from
that day showed only $119,536.40 in actual winnings. Many investors chose
to reinvest their "winnings" because they were impressed with the rate of
growth they saw in their personalized spreadsheets on the website. In reality,
Debtors' sports betting activity generally lost money. Thomas and Becker
never achieved the winning rates represented to investors.
When investors demanded payment, Thomas and Becker would say
they had the funds but often claimed they could not pay for a host of reasons,
such as the winnings were in cash and they could not deposit large amounts
of cash into bank accounts for fear of being prosecuted for money laundering
or other crimes. Most, if not all, investors were not paid out the full balance
shown in their online accounts, and many were not paid back anything at all,
even their initial investments, despite their accounts reflecting much higher
amounts. If an investor was paid, it was frequently with money from other
investors, not winnings from sports betting. There was evidence that some of
these investors were paid because Debtors' brokers suggested that doing so
4
could lead to a larger amount of new money coming in. The investor
agreements did not disclose any use of investor funds other than for betting,
and investors did not know their funds were being used to pay returns to
other investors – i.e., Ponzi payments – or being used by Debtors' principals
for personal expenses and for payment of broker commissions.
Lore was one of Debtors' brokers and received commissions (and other
compensation) for bringing in new investors, including his family and
friends. Lore met Thomas through a Craigslist ad in February 2016. Lore
admitted that he knew about Thomas's criminal past involving similar fraud
schemes. Lore is still in regular contact with Thomas.
In August 2019, the Securities and Exchange Commission ("SEC") filed
a civil action against Debtors and some associated brokers in the District of
Nevada, alleging multiple securities violations. The SEC alleged that Debtors
conducted little sports betting and used only a small portion of investor
funds for betting. Instead, investor funds were misappropriated to fund
Thomas and Becker's personal lifestyles, pay commissions to brokers and
agents, or make Ponzi payments. The SEC alleged that Thomas and Becker
spent more than 85% of investor funds on something other than betting. In
addition, none of Debtors' investment offerings were registered with the SEC,
and none of the named salespersons were registered securities brokers.
The SEC also obtained an injunction to enjoin Debtors from any further
investment activities and to freeze their monies and assets. In support, the
SEC submitted a declaration from Deborah Russell, a long-time staff
5
accountant in the SEC's Division of Enforcement. Based on her extensive
review of Debtors' bank records and her reconstruction of Debtors' books and
records, Russell opined that Debtors were running a Ponzi scheme. Russell
concluded that, at most, $4,480,847.07 (or 15%) of the nearly $30 million
Debtors raised from investors may have been used for betting activities on
their behalf. Russell further concluded that at least $11,616,332.72 of the
$13,222,296.55 paid to investors (88%) was in Ponzi payments. Thomas and
Becker asserted their Fifth Amendment rights during questioning at their
depositions, failing to answer even basic questions about their enterprise.
Ultimately, Debtors defaulted in the SEC action and final judgments of
default were entered against them in April 2021. The default judgments
enjoined Thomas and Becker from selling securities in the future and ordered
them to disgorge over $8 million of illegal profits and pay a civil penalty of $4
million. The Ninth Circuit Court of Appeals affirmed the default judgments
in June 2022.
The state of Oregon also prosecuted Becker and some of the Debtor
entities for state securities violations involving two investors. In 2018, Becker
signed a consent order admitting to the violations. He was fined $35,000.
In October 2020, a grand jury indicted Thomas and Becker for thirteen
counts of wire fraud and conspiracy to commit wire fraud in connection with
the sports betting investment scheme, which was described in the indictment
as a "Ponzi scheme." Those criminal charges are still pending.
////
6
B. Adversary complaint against Lore
Trustee filed an adversary complaint against Lore, seeking to avoid and
recover what he alleged were Debtors' actual fraudulent transfers of investor
funds to Lore under § 544(b)(1) and NRS § 112.180(1)(a). 5 Trustee alleged that
Debtors' sports betting investment scheme was a Ponzi scheme and that Lore,
as a broker for Debtors, was among the highest paid transferees in the fraud.
Between August 3, 2016 6 and December 12, 2017, Lore received $227,565.16 in
commission payments and other compensation in exchange for his services
which Trustee alleged perpetuated Debtors' Ponzi scheme ("Net Transfers").
Lore denied that Debtors ran a Ponzi scheme, and he took issue with
Russell's opinion. Attached to his answer were betting slips for sporting
events from February 11, 2017, which Lore implied proved that Debtors had
not run a Ponzi scheme. Lore maintained that Trustee could not recover the
transfers because they were made in exchange for value and he received them
in good faith.
Trustee then moved for summary judgment. ("MSJ"). The MSJ was
supported by a statement of undisputed facts, which in turn was supported
by numerous documents, including evidence demonstrating that Debtors'
sports betting investment scheme was a Ponzi scheme, and the amount of the
5
Trustee also alleged a constructive fraudulent transfer claim under Nevada law.
However, since he established an actual fraudulent transfer claim, we do not discuss the
constructive fraud claim any further.
6 Trustee's Exhibit D showing the payments to Lore contained errors. The first two
checks listed for January 23 and February 3, 2016, were actually drafted on January 23 and
February 3, 2017. So, the first transfer to Lore was on August 3, 2016.
7
Net Transfers to Lore. Trustee argued that the Net Transfers were made by
Debtors with actual intent to defraud existing and future investors in
furtherance of their Ponzi scheme. Trustee argued that Lore had no
affirmative defense to the transfers under Nevada law; he did not give
reasonably equivalent value in exchange for the transfers because he was
paid that money solely for bringing in new investors in furtherance of the
fraud, and he lacked good faith. Lore admitted that he did not see the betting
take place, did not know who placed bets, did not know how betting tickets
were handled, stored, or accounted for, and only saw one set of betting
tickets provided to him by Thomas, which Lore admitted he did not know the
value of or how to calculate their value. Further, argued Trustee, Lore had no
credible explanation for why hundreds of investors were not paid returns on
time or at all.
Trustee's expert accountant, Marc Ross, reviewed accountant Russell's
declaration and the "tens of thousands of pages" of supporting documentary
evidence from the SEC's litigation against Debtors. Ross also conducted his
own independent investigation. While Ross conceded that he could not
review Russell's privileged work product, he did not doubt the validity of her
conclusions. Ross shared Russell's opinion that Debtors were running a Ponzi
scheme that defrauded their investors out of millions of dollars and allowed
them to fund lavish lifestyles for Thomas and Becker and their families. Ross
opined that approximately $5.9 million (or 20%) of the nearly $30 million
raised from investors may have been placed on actual bets, either for the
8
benefit of the investors or Debtors' principals, and that the vast majority of
funds returned to investors as "winnings" were actually funded by Ponzi
payments; there was no evidence of deposits of winnings into Debtors' bank
accounts that would have accounted for payment of any significant returns to
investors. Ross opined that Debtors could not have done sufficient betting to
pay the returns promised by the contracts and represented on the websites.
Lore opposed the MSJ. He did not file a statement of undisputed facts
or properly respond to Trustee's statement as required by local rule. Lore
disputed Trustee's assertion that Debtors ran a Ponzi scheme. He argued that
the existence of a Ponzi scheme had not been proven in any court and that,
based on over 5,000 betting picks he witnessed in real time, there was "no
way" Debtors "could fake their ability to make a very high percentage of
winning picks." Lore argued that none of Trustee's exhibits proved Debtors
ran a Ponzi scheme, but he disputed only a portion of them and did not offer
any of his own exhibits. Lore also did not address or deny the specific facts
Trustee stated in support of the conclusion that Debtors ran a fraudulent and
illegal Ponzi scheme.
In reply, Trustee argued that Lore had failed to show that any genuine
issue of material fact was in dispute as to the Ponzi scheme, which is the only
fact Lore disputed. Trustee argued that Lore's position that Debtors were
engaged in a legitimate business was highly implausible and not supported
with any evidence. Trustee disputed Lore's claim that Debtors' business was
legitimate because of the high percentage of winning picks made. Debtors,
9
argued Trustee, did not commit fraud with fake picks; they committed fraud
by misrepresenting the profits those picks could generate, the effectiveness of
their betting strategy, and the amount of betting performed and returns
actually won. It was entirely possible for Debtors to have transparent, high-
win-rate picks and still commit sports-betting fraud.
After a hearing, the bankruptcy court entered its oral ruling on the
record granting the MSJ in its entirety. Lore did not order a transcript. The
court's written order incorporated its oral ruling by reference and stated that:
(1) Debtors made the Net Transfers to Lore with actual intent to hinder,
delay, or defraud creditors; (2) the Net Transfers were deemed avoided; and
(3) Trustee shall recover from Lore $227,656.16, plus fees, costs, and
prejudgment interest. This timely appeal followed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(H). We have jurisdiction under
28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err when it granted summary judgment in
favor of Trustee?
STANDARDS OF REVIEW
We review the appeal of a summary judgment ruling de novo.
Stadtmueller v. Sarkisian (In re Medina),
619 B.R. 236, 240 (9th Cir. BAP 2020),
aff'd, No. 20-60045,
2021 WL 3214757 (9th Cir. July 29, 2021). Under de novo
review, we view the evidence in the light most favorable to the nonmoving
10
party to determine whether the moving party was entitled to judgment as a
matter of law because no genuinely disputed issues of material fact needed to
be tried. Wolkowitz v. Beverly (In re Beverly),
374 B.R. 221, 230 (9th Cir. BAP
2007), aff'd in part, dismissed in part,
551 F.3d 1092 (9th Cir. 2008). "When the
material facts are not in dispute, our only function is to determine whether
the bankruptcy court correctly applied the law." Patow v. Marshack (In re
Patow),
632 B.R. 195, 202 (9th Cir. BAP 2021) (citation omitted), aff'd, No. 21-
60051,
2022 WL 2256325 (9th Cir. June 23, 2022).
DISCUSSION
A. Incomplete appellate record
Lore had the burden of filing an adequate record to allow review of the
order he appeals. Drysdale v. Educ. Credit Mgmt. Corp (In re Drysdale),
248 B.R.
386, 388 (9th Cir. BAP 2000). Although we ordered him to do so, Lore failed
to order and submit a transcript of the bankruptcy court's oral ruling granting
the MSJ. When findings of fact and conclusions of law are made orally on the
record, a transcript of those findings is mandatory for appellate review.
McCarthy v. Prince (In re McCarthy),
230 B.R. 414, 416-17 (9th Cir. BAP 1999).
The lack of the transcript hinders our appellate review.
In addition, Lore's opening brief does not contain a statement of facts,
standard of review, summary of the argument, or any citations to legal
authorities. See Rule 8014. Moreover, he attempts to raise issues on appeal
that were not presented to the bankruptcy court. Despite his pro se status,
Lore must follow the same rules of procedure that govern other litigants.
11
Warrick v. Birdsell (In re Warrick),
278 B.R. 182, 187 (9th Cir. BAP 2002).
Based on Lore's noncompliance with the rules and his failure to provide
a sufficient record, we can dismiss the appeal or summarily affirm the
bankruptcy court's ruling. Kyle v. Dye (In re Kyle),
317 B.R. 390, 393-94 (9th Cir.
BAP 2004), aff’d,
170 F. App'x 457 (9th Cir. 2006). However, before summarily
affirming or dismissing, we may exercise our discretion and consider
whether an informed review can be conducted with the incomplete record
provided.
Id. Here, we will exercise our discretion to examine what record we
have been provided, keeping in mind that we need only look for any
plausible basis upon which the bankruptcy court could have made the
decision it did. In re McCarthy,
230 B.R. at 417. "If we find any such basis, then
we must affirm."
Id. We find such basis here.
B. Summary judgment standards
Civil Rule 56(a), applicable here by Rule 7056, provides that summary
judgment is appropriate when "there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law." A dispute
over material facts is genuine where a reasonable jury could return a verdict
for the nonmoving party based on the evidence presented. Anderson v. Liberty
Lobby, Inc.,
477 U.S. 242, 248 (1986).
Once the movant has come forward with uncontroverted facts entitling
it to relief, the burden shifts to the nonmovant to establish that there is a
specific and genuine issue of material fact for trial. See Celotex Corp. v. Catrett,
477 U.S. 317, 322 n.3 (1986). The nonmovant "may not rely on denials in the
12
pleadings but must produce specific evidence, through affidavits or
admissible discovery materials, to show that the dispute exists." Barboza v.
New Form, Inc. (In re Barboza),
545 F.3d 702, 707 (9th Cir. 2008) (citation
omitted). Conjecture, surmise or "metaphysical doubt" by the nonmovant of
the movant's assertions will not defeat a summary judgment motion. See
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 586 (1986). The
nonmovant's evidence must be probative. Gertsch v. Johnson & Johnson, Fin.
Corp. (In re Gertsch),
237 B.R. 160, 165 (9th Cir. BAP 1999). Even in cases where
intent is at issue, summary judgment may be appropriate if the nonmovant
rests merely upon conclusory allegations, improbable inferences, and
unsupported speculation.
Id.
In deciding whether material factual issues exist, the court must resolve
all ambiguities and draw all reasonable inferences against the moving party.
Matsushita Elec. Indus. Co.,
475 U.S. at 587-88. However, the court is required
to do so only in circumstances where a fact specifically averred by the
moving party is contradicted by specific evidence submitted in opposition to
the motion. Lujan v. Nat'l Wildlife Fed'n,
497 U.S. 871, 888 (1990). If a motion
for summary judgment is properly supported and the nonmovant does not
set forth specific facts showing a genuine issue for trial, summary judgment
must be entered. Civil Rule 56(a); Rule 7056.
C. The bankruptcy court did not err in granting summary judgment.
To prevail on his fraudulent transfer claim under Nevada law, Trustee
had to show that:
13
(1) Debtors transferred an interest in property to Lore;
(2) Debtors transferred the property during the four years prior to the petition
date; and
(3) Debtors made the transfer with actual intent to hinder, delay, or defraud a
present or future creditor.
NRS § 112.180(1)(a); Leonard v. Coolidge (In re Nat'l Audit Def. Network),
367
B.R. 207, 218-19 (Bankr. D. Nev. 2007); § 544(b)(1) (authorizing trustee to
avoid fraudulent transfers under state law). "[T]he required intent to hinder,
delay or defraud is the debtor's; no collusion with the transferee is necessary."
In re Nat'l Audit Def. Network,
367 B.R. at 221. It was undisputed that the Net
Transfers to Lore were Debtors' property, and that they were made within
four years of the petition date. The only dispute was whether Debtors made
the Net Transfers with actual intent to hinder, delay, or defraud a creditor.
Trustee asserted that Debtors were running a Ponzi scheme with their
sports betting enterprise and that the Net Transfers to Lore were made in
furtherance of that scheme. The Ninth Circuit has defined a Ponzi scheme as:
an arrangement whereby an enterprise makes payments to
investors from the proceeds of a later investment rather than
from profits of the underlying business venture, as the
investors expected. The fraud consists of transferring proceeds
received from the new investors to the previous investors,
thereby giving other investors the impression that a legitimate
profit making business opportunity exists, where in fact no
such opportunity exists.
Hayes v. Palm Seedlings Partners-A, L.P. (In re Agric. Rsch. & Tech. Grp., Inc.),
916 F.2d 528, 531 (9th Cir. 1990).
14
"Transfers made in furtherance of Ponzi schemes have achieved a
special status in fraudulent transfer law." Plotkin v. Pomona Valley Imps., Inc.
(In re Cohen),
199 B.R. 709, 717 (9th Cir. BAP 1996). The mere existence of a
Ponzi scheme is sufficient to establish the debtor's actual intent to hinder,
delay, or defraud creditors under § 548(a)(1) or a state's equivalent fraudulent
transfer statute. Johnson v. Neilson (In re Slatkin),
525 F.3d 805, 814 (9th Cir.
2008); Barclay v. Mackenzie (In re AFI Holding, Inc.),
525 F.3d 700, 703 (9th Cir.
2008); Hayes, 916 F.2d at 534-35; In re Cohen,
199 B.R. at 717. And once the
existence of a Ponzi scheme is established, payments received by the
transferee that exceed his or her initial investment are deemed to be
fraudulent transfers as a matter of law. In re Slatkin,
525 F.3d at 814. That is
because the source of the so-called "profits" received by the transferee is "a
theft by the debtor from other investors."
Id. at 815 (cleaned up).
In support of his position that Debtors were running a Ponzi scheme,
Trustee set forth uncontroverted evidence from accounting experts Russell
and Ross that only 15% to 20% of the nearly $30 million Debtors raised from
investors may have been used for betting activities on their behalf, and that
the vast majority of the money paid to investors was by Ponzi payments. Lore
argues that the bankruptcy court erred in determining that Debtors were
running a Ponzi scheme. Given the record, we disagree.
Other than denying that Debtors were running a Ponzi scheme, Lore
did not present an affidavit or any other admissible evidence specifically
challenging any of the facts Trustee set forth supporting a Ponzi scheme.
15
Trustee's evidence demonstrated the existence of a Ponzi scheme, and Lore
failed to produce any specific evidence, through affidavits or admissible
discovery materials, that created a genuine issue of material fact as to that
issue. The one-day's betting tickets he submitted and his unsupported "say
so" failed to create a triable issue of material fact. What betting did occur did
not generate meaningful profits and could not have paid the promised
returns, and no significant deposits were made that would evidence other
successful betting activity. If Debtors were as successful as Lore claimed, then
it did not follow that hundreds of investors were not paid returns on time, or
at all. Despite his diligence, Trustee has been unable to locate any significant
assets for Debtors' victims.
Accordingly, the bankruptcy court did not err in determining that
Debtors were running a Ponzi scheme. We reject Lore's argument that he was
deprived of any opportunity to challenge the Ponzi presumption. Because
Debtors were running a Ponzi scheme, the payments made to Lore in
furtherance of that scheme were actual fraudulent transfers as a matter of
law. In re Slatkin,
525 F.3d at 814. Lore's argument that the transfers would be
considered illegal only if Debtors either pleaded guilty to or were found
guilty of running a Ponzi scheme is without merit. No guilty plea or verdict
in a criminal case is needed to determine that the transfers to Lore were
illegal. The bankruptcy court had full authority to decide as a civil matter
whether or not Debtors were running a Ponzi scheme.
Lore argues that the bankruptcy court erred in finding that he was
16
a "net winner." Lore is unable to cite in the record where the court made this
finding because he failed to submit a transcript of the court's oral ruling. He
also argues that Trustee relied entirely on Russell's testimony for the case
against him, but that is untrue. Trustee retained his own accountant who
shared Russell's opinion that Debtors were running a Ponzi scheme. Further,
Lore never contested the amount Trustee asserted Lore received in
commissions for bringing other investors into the scheme, so he cannot do so
now on appeal.
Next, Lore argues that the bankruptcy court erred in finding that the
law allowing claw backs is constitutional. Lore never raised this issue before
the bankruptcy court. Therefore, we need not consider it. Smith v. Marsh,
194
F.3d 1045, 1052 (9th Cir. 1999) (we generally will not consider arguments
raised for the first time on appeal). In any case, Lore has failed to cite a single
case calling into question the constitutionality of fraudulent transfer
avoidance, which every state has adopted. We also reject his related claim
that the bankruptcy court erred in finding that the law permits claw backs
further back than 90 days prior to the bankruptcy filing. NRS § 112.230(1)(a)
provides for a four-year reach back from the petition date.
Finally, Lore argues that the bankruptcy court erred in finding that the
settlements were not arbitrary. Here, Lore seems to be asserting that Trustee
pursued individuals for fraudulent transfer claims differently, settling some
cases for less money than what was transferred or dismissing some cases
altogether, which he views as unfair. We fail to see how this, even if true, has
17
any relevance. And it is certainly nothing that Lore raised before the
bankruptcy court in opposing the MSJ. Lore also lacks standing to attack
orders out of other adversary proceedings, especially when he made no
oppositions to those settlements and has alleged no particular injury or
impact on his own proceedings.
There are defenses to an actual fraudulent transfer under Nevada law.
NRS § 112.220(1) provides that such transfers are not avoidable against a
transferee who took in good faith and for a reasonably equivalent value. Once
Trustee met his burden of showing that the Net Transfers were made with the
requisite intent, it was Lore's burden to prove the existence of good faith and
reasonably equivalent value. In re Nat'l Audit Def. Network,
367 B.R. at 224.
Lore does not raise this issue on appeal. We can only assume the
bankruptcy court determined that he failed to show there were any triable
issues of fact regarding reasonably equivalent value or his good faith for the
Net Transfers. Even if Lore could arguably show good faith, he cannot show
reasonably equivalent value. Transfers from a Ponzi scheme given in
exchange for value, where that value is solely participation in or continuation
of a Ponzi scheme, are made without reasonably equivalent value required to
defend against liability. Hoffman v. Markowitz,
746 F. App'x 641, 642 (9th Cir.
2018) (holding that referral fees paid in exchange for referring others to the
Ponzi scheme do not constitute "reasonably equivalent value") (citing Warfield
v. Byron,
436 F.3d 551, 555, 560 (5th Cir. 2006) (holding that no reasonably
equivalent value is exchanged when a broker is paid commissions for
18
bringing new investors into the Ponzi scheme because the funds received by
the broker were funds skimmed from later investors' payments into the
scheme; "It takes cheek to contend that in exchange for the payments [the
broker] received, the . . . Ponzi scheme benefitted from his efforts to extend
the fraud by securing new investments.")).
There were no triable issues of fact that: (1) Debtors operated a Ponzi
scheme; (2) the Net Transfers were made to Lore with actual intent to hinder,
delay, or defraud Debtors' creditors in furtherance of that scheme and were
avoidable under Nevada law; and (3) Lore had no defense to avoidance of the
Net Transfers. Accordingly, the bankruptcy court did not err in granting
Trustee summary judgment.
CONCLUSION
For the reasons stated above, we AFFIRM.
19
