On April 19, 2024, Justice Cohen of the New York County Commercial Division issued a decision in Monex Can., Inc. v. Bank of Am., N.A., 2024 NY Slip Op. 31452(U), holding that a fraudulent transfer claim is based on the intent of the transferor, not the recipient, explaining:
Section 273(a)(l) of the DCL provides, in relevant part, that a transfer made is voidable as to a creditor if the debtor made the transfer or incurred the obligation with actual intent to hinder, delay or defraud any creditor of the debtor. Section 273(b) of the
DCL includes a non-exhaustive list of factors that the Court may consider in determining actual intent. The factors include whether the transfer was to an insider; whether the transfer rendered the transferee insolvent; and whether the debtor absconded. Section 276(a)(l) of the DCL provides that in an action for relief against a transfer or obligation under this article, a creditor may obtain avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim. Section 277 of the DCL provides certain defenses, including a good faith defense, to transferees. Section 277(g)(l) of the DCL provides that Moving Defendants bear the burden of establishing a good faith defense.It is the intent of the original transferor, in this case Handwear, that is relevant to determining whether Monex has stated a prima facie case under DCL Section 273(a)(l) for actual fraudulent transfer. Thus, where a plaintiff alleges badges of fraud raising an actual intent to defraud, establishing an actual fraudulent conveyance, dismissal is not appropriate.
The Court finds that Monex adequately alleges a viable claim for actual fraudulent transfer, including significant badges of fraud, to survive a motion to dismiss pursuant to CPLR 3016 and 321 l(a)(7). Specifically, Monex alleges that (1) the PAD funds were transferred by Handwear to Serwin and SKI in Hong Kong; (2) Handwear unlawfully reversed the PAD transactions; (3) the Hong Kong Court issued an injunction; (4) the PAD funds were distributed, in part, to Moving Defendants; (5) that the distributions were made via New York accounts; (6) that Handwear and Kochkine have absconded; (7) that the transfers to Moving Defendants were part of a scheme to launder the proceeds of the fraud; and (8) the transfers left Handwear insolvent.
Notably, Moving Defendants do not dispute that Handwear’s alleged actions vis-a-vis Monex were fraudulent. Instead, Moving Defendants attack the sufficiency of the Complaint and argue that any transfers they received were in good faith. Whether the facts alleged by Monex are ultimately proven and whether Moving Defendants have viable good faith defenses cannot be resolve on a pre-answer motion to dismiss. Moving Defendants may of course raise their arguments again on a full evidentiary record at the summary judgment stage or at trial. a later stage of these proceedings.
(Internal quotations and citations omitted).