Bankruptcy

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7^th Circuit Court of Appeals

Case Name: Douglas F. Mann v. LSQ Funding Group LC

Case No.: 22-2436

Officials: Ripple, Scudder, and St. Eve, Circuit Judges.

Focus: Bankruptcy

Weeks before Engstrom, Inc. declared bankruptcy, its CEO orchestrated a payoff agreement between one of its existing creditors, LSQ Funding Group, L.C., and a new lender, Millennium Funding. Pursuant to the agreement, Millennium paid Engstrom’s debt to LSQ, replacing LSQ as Engstrom’s creditor. In exchange, LSQ released the entirety of its interest in Engstrom’s accounts, which immediately went to Millennium. At that point, any payment on those accounts would go to Millennium instead of to LSQ.

Once Engstrom filed for bankruptcy, the Trustee of its estate sued LSQ in an attempt to avoid the payoff. As part of the suit, the Trustee alleges that the accounts Millennium purchased were worthless and that LSQ conspired with Engstrom to leave Millennium with the phony accounts when Engstrom’s business fell apart. As the Trustee sees it, Engstrom used the new financing Millennium provided to pay off LSQ, keep them quiet about the fake accounts, and keep its Ponzi scheme running just a little while longer.

Affirmed.

Decided 06/22/23

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