by Sara M. Tapinekis and Jayjeet Sharma

Diamond Sports Group LLC's (DSG) action against Sinclair Broadcast Group, Inc (SBG) and Bally’s Corporation has the potential to yield a substantial recovery for Diamond that could materially enhance distributions to its creditors. Specifically, DSG and its debtor-affiliate Diamond Sports Net (DSN, and together with DSG, Diamond) allege that SBG and its affiliated defendants engaged in a massive scheme to plunder Diamond – to the tune of USD 1.95bn – for the Sinclair Entities' (discussed below) own benefit. Diamond accuses SBG and its affiliates (as well as its former owner and indirect controlling shareholder and four of its senior officers and/or directors) of draining funds from Diamond without providing in exchange any meaningful or commensurate consideration, and through its complaint seeks to recover those funds on a number of grounds, including as both actual and constructive fraudulent transfers. Diamond also seeks to avoid the agreement that granted naming rights to Bally’s and to recover the value of those naming rights, which also has the potential to bring in a significant recovery for the estate.

Each of the defendants have moved to dismiss the 128-page, 19-count complaint and Diamond, backed by its unsecured creditors committee (UCC), opposes the dismissal motions. In this article, Debtwire’s legal analyst team discusses the accusations, causes of action and dismissal requests, and breaks down two of the larger legal issues underlying the most significant fraudulent transfer causes of action; ie – whether the Bankruptcy Code’s safe harbor clause insulates the transactions from avoidance as constructive fraudulent transfers, and whether Diamond has sufficiently pled actual fraudulent intent to survive a dismissal motion on the actual fraudulent transfer claims.

The players take the field

A brief discussion of the relationships between the parties is necessary to understand the disputes at play. Diamond provides local sports programming in the US by operating regional sports networks (RSNs) under the “Bally Sports” tradename. All of its operations are conducted by direct and indirect subsidiaries of DSG, including DSN. Historically, the RSNs’ programming was delivered by multichannel video programming distributors (MVPDs or distributors) via cable and satellite, or “linear,” broadcast, with the primary source of revenue from the RSNs being the distribution agreements that Diamond negotiated with MVPDs. Pursuant to these agreements, the MVPDs paid the RSNs monthly licensing fees (that were partly based on the number of MVPD subscribers) in exchange for access to the RSNs’ live sports content, which the MVPDs delivered to subscribers. As part of the arrangement, the RSNs made large payments to the various professional sports teams and leagues for the right to broadcast games and other content. These multi-year agreements granted the RSNs the exclusive right to telecast all local games (other than those selected for exclusive national telecast) within a specified territory. As previously discussed by Debtwire’s legal analyst team, most of Diamond’s RSNs have agreements with at least one MLB and one NBA or NHL team.

The RSNs were subsidiaries of Twenty-First Century Fox (operating as the Fox Sports RSNs) until Disney acquired them. Afterward, the US Department of Justice brought an antitrust action against Disney, and the parties ultimately entered into a settlement that required Disney to divest the RSNs.[1] This led to Sinclair’s purchase of the RSNs in August 2019. In connection with the acquisition, Sinclair created the various Diamond entities, including DSG and DSN, as well as Diamond Sports Holdings LLC (DSH), Diamond Sports Intermediate Holdings LLC (DSIH), Diamond Sports Intermediate Holdings A, LLC (DSIH-A), and Diamond Sports TopCo LLC (TopCo). In addition to SBG, Diamond also names TopCo, DSH, DSIH, and DSIH-A (collectively, the Sinclair Entities) as defendants in the litigation.

Source: First Day Declaration of David F. DeVoe, Jr, Chief Operating Officer of DSG

To fund the purchase, according to the complaint, the Sinclair defendants caused Diamond to incur USD 8.2bn of new debt, which included USD 3.3bn in secured term loans, USD 3.1bn in secured notes, and USD 1.8bn in unsecured notes. In addition, Sinclair contributed USD 1.4b and DSH issued USD 1.025bn in preferred units to JP Morgan Chase Financing, Inc (JPMCFI), which Sinclair guaranteed.

DSG calls four overarching fouls 

At the heart of Diamond’s complaint is its allegation that between Sinclair’s acquisition of the RSNs and DSG’s bankruptcy filing, Sinclair drained Diamond of at least USD 1.5bn for its own benefit. Diamond asserts this was able to happen because (i) DSG was controlled by SBG through TopCo, DSH, and DSIH-A, and (ii) DSIH and DSG had no independent board members, senior officers, or outside advisors to look after its own interests as distinct from those of Sinclair. Accordingly, Diamond filed its complaint against each of the Sinclair Entities as well as (i) David Smith, Sinclair’s current Executive Chairman and former CEO, (ii) Chris Ripley, SBG’s CEO, (iii) Lucy Rutishauser, SBG’s CFO, and (iv) Scott Shapiro, who served in senior positions at both SBG and DSG during the relevant time period (collectively, the Individual Defendants and together with the Sinclair Entities, the Sinclair Defendants or Sinclair). According to Diamond, the defendants drained Diamond of assets in four primary ways.

Firstly, Diamond alleges that immediately upon acquiring Diamond, Sinclair caused DSG to enter into a management services agreement (MSA) with Sinclair that obligated Diamond to pay “extortionate, off-market base fees and incentive bonuses to Sinclair for management services” that “far exceeded the value of those services by any fair estimate.” Through April 2023, Sinclair caused Diamond to make MSA payments that exceeded USD 400m– ie - over USD 100m per year over four years, according to the complaint. Diamond contends that these amounts exceeded fees paid by other RSNs under comparable arrangements, noting that before Sinclair’s acquisition, “most of the same RSNs had paid no such fees at all to their prior owner, Twenty-First Century Fox, and those RSNs that did only paid a small fraction of the exorbitant fees Sinclair imposed.” As additional support for this contention, Diamond states that before signing the MSA, Duff & Phelps, a financial consultant retained by Sinclair, concluded that the fees that Diamond was required to pay were “significantly in excess” of those paid in comparable transactions. Diamond also asserts that the “vast bulk of the fees were paid when Diamond was insolvent.”

A second allegation concerns the preferred units issued to JPMCFI. Here, Diamond argues that between September 2019 and December 2022, Sinclair caused DSG to issue approximately USD 929m in cash distributions (Distributions) to its sole member, DSIH, which in turn distributed the funds to its sole member, DSIH-A, which then upstreamed the funds to its parent, DSH, with a portion of the funds being used to redeem nearly USD 850m of JPMCFI’s preferred units, which were not obligations of DSG. While this relieved SBG and DSH of their obligations under the preferred units and the related guarantee, DSG received no benefit for the transfer.

Source: Complaint

Diamond also bases several causes of action on transactions with Bally’s, alleging that in November 2020, “when Sinclair’s publicly available financial statements for DSIH showed that DSG was irrefutably insolvent - Sinclair and DSG entered into a partnership with Bally’s, a gaming company, that further enriched Sinclair at Diamond’s expense. “[S]igned just two weeks after Sinclair announced a [USD 4.2bn] impairment of DSG’s goodwill and intangible assets that left DSG with [USD 2.5bn] in negative equity,” Diamond entered into an agreement that gave Bally’s the naming rights to all of the RSNs in exchange for USD 88m payable over 10 years and marketing commitments from Bally’s (the Bally’s Transaction). Diamond alleges that the transaction was negotiated entirely by Sinclair personnel, and for far below what other bidders expressed a willingness to pay. Diamond contends that Sinclair made the decision to sell DSG’s naming rights to Bally’s so that Sinclair could acquire an equity stake in a gaming partner. While Diamond argues that DSG provided the most valuable consideration in the Bally’s Transaction – ie - the right to rename all of the Fox-branded RSNs as the “Bally’s Sports” RSNs, Sinclair provided comparatively little to Bally’s in the deal. Yet Sinclair, not DSG, received by far the largest share of the consideration  - ie - options and warrants worth between USD 184m and USD 199m. Diamond accuses Sinclair of rejecting competing bids for the DSG naming rights that would have provided DSG with far greater consideration because those offers would not have provided similar equity value to Sinclair.

Lastly, Diamond accuses Sinclair of misappropriating Diamond assets and breaching the MSA by causing Diamond employees to provide services exclusively for the benefit of Sinclair. For example, Diamond contends that some “ostensible Diamond employees spent, by Sinclair’s own calculations, 100% of their time working for Sinclair yet 100% of their compensation was paid by Diamond.”

Unsportsmanlike conduct: accusations of fraudulent transfers, self-dealing, contract breaches, fiduciary duty breaches and unjust enrichment

As discussed above, the complaint is founded on allegations that, as Diamond’s business slid toward bankruptcy, it was forced to (i) make outsized payments to Sinclair for purported management and administrative services, (ii) pay hundreds of millions of dollars in dividends to DSIH for the ultimate purpose of enabling DSH and SBG to satisfy their obligations to JPMCFI concerning the preferred units, (iii) facilitate a partnership with Bally’s that largely benefitted Sinclair rather than Diamond, and (iv) provide valuable services exclusively for Sinclair’s benefit. In addition to the fraudulent transfer claims noted above, Diamond also argues that the funds diverted to Sinclair constitute illegal distributions under the law of Delaware (under which the Diamond entities are organized). Lastly, Diamond argues that Sinclair’s “raiding of Diamond’s coffers” violated its fiduciary duties as the ultimate controller of Diamond.

The specific causes of action in the complaint are summarized in the table below.

The best defense: Bally’s and the Sinclair Defendants move to dismiss

Represented by Jones Day, Bally’s moved to dismiss Counts IX, X, and XI of the complaint, which seek to avoid the Bally’s Transaction as both actual and constructive fraudulent transfers, and to recover the fair value of the naming rights on the grounds that the transfer occurred outside the two-year look-back period permitted under section 548 of the Bankruptcy Code. Represented by Kirkland & Ellis, with Zack Clement serving as local counsel, the Sinclair Defendants also moved to dismiss, arguing the following:

• The Distributions cannot be avoided as constructively fraudulent transfers because they are protected under the Bankruptcy Code’s safe harbor provision set forth in section 546(e);
• Payments made under the MSA cannot be avoided as constructively fraudulent transfers because they were made to satisfy prior contractual commitments and thus were for reasonably equivalent value;
• The claims seeking to avoid transfers as actual fraudulent transfers must be dismissed because the complaint fails to allege actual intent to hinder, delay, defraud any entity;
• Count IV, which asserts that the Distributions violated Chapter 18 of Title 6 of the Delaware Code by taking distributions from DSG when it knew that the Distributions would render DSG insolvent, must be dismissed because the complaint fails to adequately plead that DSIH had actual knowledge that the Distributions would cause DSG to become insolvent;
• Section 548 of the Bankruptcy Code only permits the avoidance of fraudulent transfers that took place within two years of the petition date (here – 14 and 15 March 2023), and prior to the bankruptcy filing, Diamond and Sinclair entered into a tolling agreement. Therefore the two-year look-back period bars all section 548 claims based on transfers occurring before 20 October 2020. Consequently, DSG may not avoid under section 548: (i) USD 914m of the alleged Distributions from DSG, including all the amounts used to repurchase the JPMCFI preferred equity units; and (i) all payments under the MSA before 20 October 2020;
• The complaint fails to state a claim for breach of the MSA listed in Count VIII because it fails to tie specific MSA provisions to the debtors’ allegations against STG, let alone allege conduct giving rise to an actual breach of the agreement, and instead contains merely conclusory allegations;
• The claims for the implied covenant of good faith and fair dealing (Count XIV) must be dismissed because the complaint fails to state a claim for, among other things, failing to allege the specific implied contractual obligation in the DSG LLC Agreement or a breach of that obligation or to identify any triggering gap in the LLC agreement. The Sinclair Defendants also argue that “Diamond should not be permitted to invoke the implied covenant to circumvent the principle that wholly owned subsidiaries exist to advance the benefit of the parent entity;”
• The claim for unjust enrichment (Count XV) is barred by the existence of the DSG LLC Agreement, because an unjust enrichment theory only lies in the absence of an applicable contract;
• The breach of fiduciary duty claims against the Individual Defendants are expressly waived by clauses in the LLC agreements of DSG and DSH and because under applicable case law, “SBG—an indirect parent four companies removed from DSG—did not owe any fiduciary duties to Diamond.” For these reasons, Count XVIII, which asserts a cause of action for aiding and abetting breach of fiduciary duty also fails; and
• The complaint fails to state a claim to pierce the corporate veil given that each of the entities whose veil Diamond seeks to pierce (ie - DSG, DSIH, DSIH-A, DSH, and TopCo) are organized under and subject to Delaware law, which has a stringent standard for disregarding corporate separateness (ie - only in exceptional circumstances). In short, the complaint fails to allege facts to support a claim that [the Sinclair Entities] operated as a single economic entity and that an “overall element of injustice or unfairness ... is present.”

Diamond and its UCC have opposed the motions to dismiss. In terms of the timeliness of the fraudulent transfer actions, Diamond points out that although section 548 has a two-year look-back period, the parties entered into a tolling agreement, which all agree allows for the avoidance of transfers entered into on 20 October 2022. Also, Diamond points out that its fraudulent transfer claims are also grounded in Maryland law, which has a three-year look-back period, and Delaware state law, which has a four-year look-back period.

Calling balls and strikes: the safe harbor and actual fraudulent intent

While a number of legal issues are raised in the motions to dismiss, arguably the most significant are those that relate to the fraudulent transfer claims, including whether (i) the safe harbor set forth in section 546(e) of the Bankruptcy Code applies to insulate the Distributions, and (ii) Diamond has adequately plead actual fraudulent intent for purposes of its actual fraudulent transfer claims.

Safe harbor defense: focusing on the transfer at issue

With respect to the safe harbor defense, section 546(e) of the Bankruptcy Code provides that notwithstanding the Bankruptcy Code sections authorizing the avoidance of fraudulent transfers, a trustee “may not avoid . . . a transfer made by or to (or for the benefit of) a . . . financial participant . . .  in connection with a securities contract.” Similarly, section 546(e) protects settlement payments that are made by, to, or for the benefit of a financial participant. To be clear, section 546(e)’s safe harbor provision does not protect against claims to avoid intentional fraudulent transfers. The Sinclair Defendants argue, however, that applicable case law establishes that the constructive fraudulent transfer claims brought under state law through section 544 of the Bankruptcy Code are similarly subject to the safe harbor provision.

For the Sinclair Defendants to succeed in having the constructive fraudulent transfer claims with respect to the Distributions dismissed under section 546(e)’s safe harbor, they must prove that the relevant parties qualify as a financial participant and that the Distributions either were made in connection with a securities contract or constitute “settlement payments.” The Sinclair Defendants argue that the use of USD 849.5m of DSG’s funds to redeem JPMCFI’s preferred equity satisfies both of these definitions, and the remaining USD 79.5m in distributions are transfers in connection with a securities contract, and thus  qualify for safe harbor protection.

Bankruptcy Code section 101(22) defines a “financial participant” to include, among other things, an entity with one or more securities contracts, the minimum aggregate value of which is at least USD 1bn in notional or actual principal amount outstanding at one of the following times: (i) the time the entity enters into a securities contract; (ii) the petition date; or (iii) any day during the 15-month period preceding the petition date. The Sinclair Defendants argue that (i) the relevant transfers are from DSG through DSH to JPMCFI, and (ii) JPMCFI and DSH qualify as financial participants because they are parties to securities agreements with a value of one billion dollars or more.

Section 741(7) of the Bankruptcy Code defines a securities contract as “a contract for the purchase, sale, or loan of a security . . . including any repurchase . . . transaction on any such security” or any other agreement or transaction that is similar to such an agreement. Section 101(49)(A) of the Bankruptcy Code defines a “security” to include a “note,” “stock,” “transferable share,” or “other claim or interest commonly known as ‘security.’”

As the US Court of Appeals for the Second Circuit explained in the case of Enron Creditors Recovery Corp, most courts agree that the definition of a settlement payment in the context of the securities industry should be “the transfer of cash or securities made to complete [a] securities transaction.”[2] In that case, the Circuit Court disagreed with Enron and the Bankruptcy Court and ruled that payments Enron made as part of an early redemption of its commercial paper qualified for safe harbor protection under section 546(e). In doing so, the Court noted that Enron’s commercial paper was the widely issued debt securities, rather than “non-tradeable” debt.

Diamond, on the other hand, argues that the safe harbor does not apply to the USD 929m in Distributions because Sinclair’s reliance is based on the wrong transfer. Specifically, Diamond cites a US Supreme Court decision holding that the “focus” of the safe harbor analysis must be “the transfer the trustee [or in this case, the debtor] seeks to avoid.”[3] According to Diamond, “an insolvent DSG was forced to distribute $929 million to non-debtor defendant DSIH, DSG’s immediate corporate parent” and then “DSIH distributed the funds to its corporate parent, DSIH-A, which distributed funds to its majority and minority equity owners, DSH and Byron Allen (a friend of Smith)” and that “DSH used its portion of the DSIH-A distributions to pay JPMCFI on account of preferred equity units in DSH.”

Breaking down the distinction, Diamond seeks to (i) avoid the transfer of funds from DSG to SDIH, and (ii) recover the subsequent transfers from DSIH-A, DSH, and SBG.[4] While the argument may appear to be splitting hairs, Diamond argues that when reviewing whether the safe harbor applies to insulate a transfer, the court must focus on the transfer sought to be avoided – here, the payment from DSG to DSIH. Moreover, Diamond argues that transfers to subsequent transferees (here – DSIH-A, DSH and JPMCFI) are not protected by the safe harbor, and therefore none of the claims in the complaint is protected by the safe harbor defense.

The distinction between avoidance and recovery of transfers is at play here. While section 548 of the Bankruptcy Code authorizes the avoidance of fraudulent transfers, section 550 provides that, to the extent a transfer is avoided under section 548, the debtor “may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from (1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee.” As noted above, section 546(e) prohibits the ability to “avoid” protected transfers, and does not explicitly prohibit the ability to “recover” avoided transfers. While section 550 of the Bankruptcy Code provides a list of other parties from whom avoidable transfers may not be recovered (eg - a transferee that takes for value, including for payment of an antecedent debt, in good faith, and without knowledge of the voidability of the transfer avoided), it does not specify recipients of transfers protected by section 546(e)’s safe harbor. In short, while the safe harbor protects avoidance, Diamond argues, it does not protect against recovery from subsequent transferees. In other words, Diamond notes that Sinclair has not argued – as it cannot – that the DSG-to-DSIH initial transfers are themselves safe harbored. Instead, they argue that the subsequent transferees qualify as financial participants and are therefore safe harbored.

On the other hand, section 546(e) protects against the avoidance of transfers not just “to” a party, but also “for the benefit of” a party. Here, Sinclair argues that the transfers fall within the safe harbor protection because they were made for the benefit of JPMCFI and DSH, each of which qualifies as a financial participant.

Badges of fraud and actual fraudulent transfer claims

As noted above, while the safe harbor defense insulates certain transfers from constructive fraudulent transfer claims, it offers no protection against claims involving an actual fraudulent transfer. A complaint asserting actual fraud (involving fraudulent intent), as opposed to constructive fraud, is typically subject to a heightened pleading standard in that it “must state with particularity the circumstances constituting fraud.”[5] The Sinclair Defendants argue that the complaint fails to meet this heightened pleading standard. However, in cases involving fraudulent transfers, given the difficulty of alleging a third party’s intent, most courts will allow a complaint to survive a motion to dismiss if it adequately pleads various “badges of fraud” as an alternative. Diamond acknowledges that the Fifth Circuit has never “addressed the question of whether an actual fraudulent transfer claim is subject to Rule 9(b)’s heightened pleading requirements.” We note, however, that US Bankruptcy Court for the Southern District of Texas has found that badges of fraud are acceptable pleading standards with respect to the Texas Uniform Fraudulent Transfer Act.[6]

As noted above, Diamond’s claims for actual fraudulent transfers are based on state law, including the Maryland Uniform Fraudulent Conveyance Act (MUFCA), and/or Delaware Uniform Fraudulent Transfer Act (DUFTA). Both MUFCA and DUFTA require a plaintiff to prove that a debtor made the transfer with actual intent to hinder, delay, or defraud. The badges of fraud that courts typically look to in actual fraudulent conveyance actions include, but are not limited to: (i) the relationship between the debtor and the transferee; (ii) consideration for the conveyance; (iii) insolvency or indebtedness of the debtors; (iv) how much of the debtor's estate was transferred; (v) reservation of benefits, control or dominion by the debtor over the property transferred; and (vi) secrecy or concealment of the transaction.[7]

Here, Diamond has pled the insolvency element and lack of consideration, as well as the close relationship between DSG and the Sinclair Defendants. However, the Sinclair Defendants argue that the complaint fails to allege that DSG had actual intent to defraud its creditors by making the transfers at issue, noting that the timing of the payments was not in response to financial difficulties, additional debt, or the threat of lawsuits. The Sinclair Defendants also argue that adequately pleading three badges of fraud -that the transferees were insiders, the debtors were insolvent at the time, and the transfers were made in the face of substantial debts – is insufficient to meet the pleading standards. Disagreeing, Diamond points to the following allegations in the complaint:

• “according to sworn testimony by MLB Commissioner Manfred, Smith expressly acknowledged that the MSA was part of a plan by Sinclair to “milk [Diamond] of $150 million . . . in management fees every year, and whatever else I can take out of the company until I basically have my investment in the RSNs out,” and then to “file for bankruptcy.” Diamond further alleges in the complaint that given Sinclair’s degree of dominance and control over Diamond, Sinclair’s fraudulent intent is attributable to Diamond for purposes of alleging that the transfers were made with actual intent to defraud creditors.
• In February 2021 - three months after the Bally’s Transaction was executed, Sinclair obtained an opinion from Duff & Phelps on the fairness of the transaction to both Sinclair and Diamond which was partly based on false representations from Sinclair. The complaint also alleges that while Duff & Phelps overvalued contributions from Sinclair, “[e]ven more egregiously, Duff & Phelps assigned a value of zero to the naming rights provided by Diamond to rename all of the RSNs as Bally’s Sports—the primary consideration Bally’s got in the deal. Duff & Phelps has offered no explanation or justification for assigning no value to Diamond’s naming rights.”
• The Bally’s Transaction closed just two weeks after Sinclair disclosed that it had taken a USD 4.2bn write-down of Diamond’s intangible assets, leaving Diamond with negative equity of USD 2.5bn.
• Sinclair acted as Diamond’s representative in the Bally’s Transaction, and the parties proceeded with the transaction notwithstanding an express warning from their own attorneys (citing a redacted portion of the complaint). Also according to the complaint, in October 2020, Vice President of Investor Relations, Steven Zenker expressed concern to Individual Defendants Ripley and Rutishauser that “the DSG lenders will be all over us about how [the sports gaming partnership] fits into and how it benefits (or doesn’t benefit) DSG.”

The next inning

A decision on the motion to dismiss will be a pivotal point in the case, and most notably will need to address the arguments discussed above concerning the application of the safe harbor provision and whether the complaint meets the requisite standards for pleading actual fraud. Whether the safe harbor protects the “overarching transfer” from DSG down the line to DSH (and ultimately to JPMCFI), or whether it only protects the initial transfer to DSIH (and therefore DSIH must qualify as a financial participant) does not appear to have been conclusively ruled upon by any existing precedent within the Fifth Circuit, where the adversary proceeding is pending. A favorable ruling for the Sinclair Defendants on this issue would wipe out the plaintiffs’ constructive fraudulent transfer claims with respect to the Distributions. However, given the unsettled nature of existing applicable case law, we would not be surprised to see an appeal of any such ruling, particularly given the amounts at stake for both sides.

As to pleading fraud, given the complaint’s citations to testimony from individuals involved, we believe it is more likely than not that the actual fraudulent transfer claims based on the MUFCA and DUFTA should survive the motions to dismiss on these grounds, so long as the court finds that the complaint has adequately pled that the Sinclair Defendants exercised the requisite degree of dominion and control over Diamond. We further believe that the court should find that this element has been adequately pled, given that according to the complaint, beginning with Diamond’s acquisition “and until at least April 2021, Sinclair controlled every aspect of DSG’s business. Despite having its own lenders, bondholders, and other creditors as Sinclair had arranged, DSG had no independent board members, senior officers, or outside advisors to look after its own interests as distinct from those of Sinclair. On the contrary, Smith . . . testified that he did not believe that DSG even had its own interests, and that instead he viewed Sinclair and Diamond as ‘one and the same.’” For these reasons, we would expect the court to find that the badges of fraud have been adequately pled.

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[1] On 27 June 2018, the US Department of Justice announced that it required The Walt Disney Company to divest 22 RSNs as a condition of its USD 71.3bn acquisition of certain assets from Twenty-First Century Fox, Inc.

[2] See Enron Creditors Recovery Corp v. Alfa SAS AB,  651 F.3d 329 (2d Cir. 2011).

[3] See Merit Management v. FTI Consulting, Inc, 138 S. Ct. 883 (2018) (emphasis added).

[4] Although SBG is not identified as a transferee, the argument is that the transfer was made “for the benefit of” SBG because it relieved SBG of its obligations under the guarantee. Also, the debtors have sought to recover the transfers from JPMCFI in a separate action. JPMCFI has moved to dismiss the complaint in that action and the debtors, supported by the UCC, have opposed the motion to dismiss.

[5] See Fed. R. Civ. P. 9(b).

[6] See Husky International Electronics, Inc v. Daniel Lee Ritz (In re Ritz), 567 B.R. 715 (Bankr. S.D. Tx. 2018) applying 11 badges of fraud and finding that the plaintiff had pled fraud with the requisite particularity.

[7] See SB Liquidation Trust v. Preferred Bank, (In re Syntax-Brillian Corp), Case No. 08–11407 (Bankr. D. Feb 8, Del. 2022) considering complaint alleging actual fraudulent transfer under DUFTA.