## Facts

- Hypnotic Taxi LLC and affiliated taxi-medallion entities filed for chapter 11 after defaulting on over $30 million in secured loans held by Citibank, N.A.
- Evgeny Freidman owned or controlled the debtor entities and personally guaranteed Citibank’s loans.
- As taxi medallion values fell, Citibank sought to enforce Freidman’s guaranties by pursuing his personal assets, including real estate.
- Before Citibank’s collection efforts, Freidman created multiple offshore trusts benefiting himself and immediate family members and transferred substantially all of his attachable real-estate interests to those trusts.
- After the transfers, the trusts’ trustees took no meaningful steps to independently administer the properties, and Freidman retained possession and control.
- Citibank commenced an adversary proceeding and obtained a New York order of attachment and restraining order under CPLR Article 62 and Federal Rule of Civil Procedure 64 (via Bankruptcy Rule 7064) against assets Citibank alleged were effectively Freidman’s.
- The trusts petitioned under CPLR § 6221 to vacate the attachment and restraints, asserting the assets belonged to the trusts and raising procedural objections.
- Following an evidentiary hearing, including Freidman’s testimony, the court addressed whether the trust transfers were fraudulent and whether the attached assets were reachable.

## Issues

1. Whether Freidman transferred real-estate interests to offshore trusts with actual intent to hinder, delay, or defraud Citibank under New York Debtor and Creditor Law § 276.
2. Whether Citibank could attach assets titled in the trusts based on Freidman’s retained beneficial ownership and control.
3. Whether procedural objections (ownership formalities, alleged non-joinder, and specificity of the attachment) required vacatur of the attachment and restraining orders.

## Decision

- The court found Freidman made the transfers to the offshore trusts with actual intent to hinder or delay Citibank’s collection on his guaranties.
- The court upheld Citibank’s prejudgment attachment and restraining orders against the trust-titled assets because Freidman retained control and the transfers were ineffective against the creditor.
- The court denied the trusts’ request to vacate the attachment under CPLR § 6221 and rejected technical defenses based on nominal title, joinder, and alleged lack of specificity.
- The court declined to treat other collateral (taxi medallions) as an adequate reason to deny attachment given the collapse in medallion values and Citibank’s entitlement to available remedies once statutory requirements were met.

## Legal Principles

- Under New York Debtor and Creditor Law § 276, a transfer made with actual intent to hinder, delay, or defraud creditors may be disregarded, and intent may be inferred from circumstantial “badges of fraud.”
- Badges of fraud include insider transfers, timing during financial distress or creditor pressure, transfer of substantially all attachable assets, retention of possession or control, and a non-credible explanation for the transfers.
- Prejudgment attachment under CPLR Article 62, applied through Federal Rule of Civil Procedure 64 and Bankruptcy Rule 7064, is available when statutory grounds are shown, including where fraudulent transfers are alleged.
- Courts may treat a transferor as the beneficial owner for creditor-remedy purposes when property is placed in family-related trusts or entities but the transferor continues to control and enjoy the property; formal title does not bar attachment in such circumstances.

## Conclusion

The bankruptcy court upheld Citibank’s prejudgment attachment and restraints, concluding that Freidman’s rapid transfer of essentially all attachable real-estate interests to offshore family trusts—while retaining control—was undertaken with actual intent to hinder or delay Citibank and therefore did not shield the assets from creditor process.


In re Hypnotic Taxi, LLC, 543 B.R. 365 (Bankr. E.D.N.Y. 2016)