Bankruptcy — fraudulent transfers

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United States Court of Appeals For the Seventh Circuit

Civil

Bankruptcy — fraudulent transfers

Investors who redeemed shares before a bankruptcy did not receive preferential transfers or fraudulent conveyances that must be returned.

“The Trustee has not referred us to any legislative history about the meaning of ‘settlement payment’ or ‘in connection with’, the phrases he thinks ambiguous. The second circuit held in Enron that ‘settlement payment’ means what it ordinarily does in the securities business: the financial settling-up after a trade. 651 F.3d at 339. Brokers will sell customers’ shares of stock on the market without having them in hand. The customer later turns over the stock and receives the proceeds; that’s the settlement for the transaction. Here the investors told the Funds to redeem some of their shares; the swap of money for shares was a settlement payment. And, as Quebecor holds, ‘transfer’ is a more comprehensive term and usually makes it unnecessary to decide whether a given transaction entailed a ‘settlement payment’. 719 F.3d at 98. A ‘transfer’ from the Funds to each redeeming investor undoubtedly occurred. As for ‘in connection with’: decisions such as Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006), and United States v. O’Hagan, 521 U.S. 642 (1997), show that it is more than comprehensive enough to cover the Funds’ redemption of the investors’ shares.”

Affirmed.

12-2463, 12-2464, 12-2493, 12-2494 & 12-2495 Peterson v. Somers Dublin Ltd.

Appeals from the United States District Court for the Northern District of Illinois, Cox, Bankr. J., Easterbrook, J.