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“[L]ack of good faith in a SIPA [Securities Investor Protection Act] liquidation applies an inquiry notice, not willful blindness, standard, and that a SIPA trustee does not bear the burden of pleading the transferee’s lack of good faith,” held the U.S. Court of Appeals for the Second Circuit on Aug. 30, 2021 in In re Bernard L. Madoff Investment Securities, LLC, 2021 WL 3854761, 91 (2d Cir. Aug. 30, 2021) (Madoff). Reversing the district court’s imposition of federal securities law in this fraudulent transfer action, the Second Circuit applied federal bankruptcy law when holding that good faith is an affirmative defense under sections 548(c) and 550(b)(1). It rejected the district court’s requiring the trustee to” bear the burden of pleading the transferee’s lack of good faith,” Id. at 17, refusing to depart “from the well-established rule that the defendant bears the burden of pleading an affirmative defense.” Id. at 57.
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Seventh Circuit Applies Safe Harbor to Private Securities Transaction
By Michael L. Cook
“… [T]he term ‘securities contract’ as used in [Bankruptcy Code] §546(e) unambiguously includes contracts involving privately held securities,” The Seventh Circuit held in Petr v. BMO Harris Bank, N.A.
By Lawrence J. Kotler and Elisa Hyder
In Lafferty v. Off-Spec Solutions, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit held that the discharge exceptions under Section 523(a) do not apply to corporate debtors under Subchapter V of Chapter 11 of the Bankruptcy Code.
Merchant Cash Advances Could Be More Trouble Than They’re Worth
By Joseph Pack and Jessey Krehl
As small-business owners have continued to struggle in an uncertain economy, a growing number have begun the dangerous practice of relying on merchant cash advances — essentially seeking financial shelter in a lion’s den.
Biotech Industry Bankruptcy Case Update: ‘Zymergen’ and ‘Humanigen’
By Edward E. Neiger, Marianna Udem and Joo Hee Park
This Bankruptcy Case Update focuses on the recent biotech industry bankruptcy cases of Zymergen and Humanigen.
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