## Facts

- A debtor operated a Ponzi scheme involving purportedly discounted luxury automobiles, collecting funds from multiple participants.
- Using pooled participant funds, the debtor purchased vehicles from automobile dealers at full retail price; the dealers received payment by checks that cleared.
- At the debtor’s direction, the dealers delivered the vehicles to persons designated by the debtor, including favored Ponzi participants.
- When the scheme collapsed, the debtor filed Chapter 7, and a trustee sought to recover value tied to multiple car-purchase transactions.
- The trustee sued the dealers in adversary proceedings, asserting fraudulent transfer claims under 11 U.S.C. § 548 for some transactions and under California’s Uniform Fraudulent Transfer Act (UFTA) for others.
- The bankruptcy court granted summary judgment for the dealers, finding the sales were ordinary retail transactions for fair value and in good faith.
- The trustee appealed to the Ninth Circuit Bankruptcy Appellate Panel (BAP), which reviewed the summary judgments de novo.

## Issues

1. Whether the debtor, who paid for the vehicles and controlled their disposition, was the relevant “transferee” of the vehicles for fraudulent transfer analysis even though delivery went directly to third parties.
2. Whether the transactions were avoidable as fraudulent transfers under 11 U.S.C. § 548 when conducted in furtherance of a Ponzi scheme.
3. Whether the dealers were protected by the good-faith transferee-for-value defense under 11 U.S.C. § 548(c).
4. Whether California UFTA permitted avoidance or recovery from the dealers despite the dealers’ retail sales for reasonably equivalent value.
5. Whether California vehicle title-transfer law and UCC principles affected identification of the transferee and the avoidability analysis.

## Decision

- The BAP affirmed summary judgment for the dealers on both the Bankruptcy Code and California UFTA claims.
- The BAP treated the debtor as the dealers’ transferee of the vehicles because he paid for them and had sole power to designate the ultimate recipients.
- Even assuming the debtor’s overall conduct supported fraudulent transfer elements in a Ponzi-scheme context, the dealers took payments in good faith and provided value by selling vehicles at ordinary retail prices.
- The dealers therefore could retain the funds under § 548(c) and were not liable under California UFTA based on reasonably equivalent value and good faith.
- California title-transfer rules supported viewing the dealer-to-debtor sale as a legitimate value-for-payment exchange, with any fraudulent benefit arising from the debtor’s subsequent allocation of cars to participants.

## Legal Principles

- A Ponzi scheme may supply the requisite intent for actual fraudulent transfer theories, but liability depends on the status and defenses of the targeted transferee.
- For fraudulent transfer purposes, the “transferee” is the party with dominion and control over the disposition of the property; directing delivery to third parties can still make the purchaser the transferee.
- Under 11 U.S.C. § 548(c), a transferee that takes in good faith and gives value may retain what it received to the extent of the value given.
- Under California UFTA, a transferee that receives a transfer in good faith and for reasonably equivalent value is generally protected from avoidance and recovery.
- California vehicle title-transfer requirements, read alongside UCC rules, may confirm that a retail automobile sale transfers ownership interests to the purchaser even if delivery is made to a third party at the purchaser’s instruction.

## Conclusion

The BAP held that the debtor was the relevant transferee of vehicles purchased from dealers because he paid for them and controlled who received them, and it affirmed summary judgment because the dealers acted in good faith and exchanged vehicles for ordinary retail value, defeating avoidance and recovery under § 548(c) and California UFTA.


Plotkin v. Pomona Valley Imports, Inc. (In re Cohen), 199 B.R. 709 (B.A.P. 9th Cir. 1996)