District Court for the Northern District of Texas. Later, a Receiver sued to recover Magness’s withdrawal of investments as a fraudulent transfer, under UFTA. He withdrew his investments after news of an SEC investigation became public. Gary Magness was one of the largest investors, with $79 million of fraudulent CDs. It sold fraudulent certificates of deposit and issued “returns” to old investors with money from new investors. Stanford International Bank, Ltd., ran a Ponzi scheme with over $7 billion in investments. whether a transferee on inquiry notice of fraudulent intent can achieve good faith status without investigating its suspicions, even when an investigation would have revealed nothing.Specifically, the Fifth Circuit wants to know what Texas law requires on this question: Court of Appeals for the Fifth Circuit asked for guidance from the Texas Supreme Court on what constitutes “good faith” under the UFTA. Yet, even if a transfer is fraudulent, the transferee might escape claw back by proving “good faith.” -The Certification Texas’s Uniform Fraudulent Transfer Act (UFTA) is designed to protect creditors from being defrauded by unscrupulous debtors: aggrieved creditors may “claw back” a fraudulent transfer from the transferee. Certified Question -Background for the Question 19-0452 in the Texas Supreme Court (decided December 20, 2019), which Court is answering a certified question of state law from the U.S. Court Ruling: A transferee on inquiry notice of fraud must diligently investigate its suspicions, before a good faith defense is available, even if an investigation would have revealed nothing.
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