## Facts

- George and Nikki Chomakos, Michigan residents, placed repeated gambling wagers at the Flamingo Hilton, a state-regulated Nevada casino.
- The debtors later filed bankruptcy on August 2, 1990 (initially Chapter 11, converted to Chapter 7), and David W. Allard, Jr. was appointed Chapter 7 trustee.
- The trustee sued the casino, seeking to avoid the debtors’ gambling transfers as constructively fraudulent under 11 U.S.C. § 548(a) (one-year lookback) and Michigan’s Uniform Fraudulent Conveyance Act (six-year period).
- The bankruptcy court found the debtors were insolvent beginning in January 1988 and had net gambling losses of about $7,710 at the Flamingo during the relevant period.
- The trustee argued the debtors received less than “reasonably equivalent value”/“fair consideration” because the casino had a house advantage and the debtors ultimately lost more than they won.
- The casino argued each wager exchanged money for an enforceable chance to win and for entertainment in a lawful, regulated market.
- The bankruptcy court held the wagers provided reasonably equivalent value/fair consideration and were not avoidable; the district court affirmed.

## Issues

1. Whether an insolvent debtor’s prepetition wagers at a state-regulated casino can be avoided as constructively fraudulent transfers under 11 U.S.C. § 548(a) for lack of “reasonably equivalent value” when the debtor incurs net gambling losses.
2. Whether the same wagers are voidable under Michigan’s UFCA for lack of “fair consideration.”
3. Whether the enforceable chance to win and entertainment associated with lawful, regulated gambling constitute “value” for fraudulent transfer analysis.

## Decision

- The Sixth Circuit affirmed the judgment for Flamingo Hilton.
- The court held the debtors received “reasonably equivalent value” under § 548(a) and “fair consideration” under Michigan’s UFCA in exchange for their wagers.
- The trustee therefore could not avoid or recover the gambling losses from the casino.

## Legal Principles

- Fraudulent transfer “value” is assessed at the time of each transfer, not by later net outcomes across multiple transactions.
- A lawful, state-regulated casino wager is a contractual exchange in which the patron receives value through an enforceable chance of winning, even though the casino has a statistical advantage.
- Entertainment received in a legal, regulated gambling setting may contribute to “value” for purposes of “reasonably equivalent value” and “fair consideration.”
- “Reasonably equivalent value” under § 548(a) and “fair consideration” under Michigan’s UFCA were treated as materially similar standards in this context; ordinary regulated gambling was not deemed constructively fraudulent solely because the debtor lost money.

## Conclusion

Because each wager at a regulated casino provided the debtors an enforceable chance to win (and associated entertainment), the transfers were supported by reasonably equivalent value/fair consideration and were not avoidable as constructive fraudulent conveyances under federal or Michigan law.


Allard v. Flamingo Hilton (In re Chomakos), 69 F.3d 769 (6th Cir. 1995)