Mitigating Lender Risks of Fraudulent Transfers in Bankruptcy and Under State Uniform Voidable Transactions Acts
Navigating Lender Inquiry Notice and Due Diligence; Recent Developments
About the Course
Introduction
This CLE webinar will discuss risks lenders face when a borrower or other creditor challenges payments made by the borrower to the lender as a fraudulent transfer either in bankruptcy or under state Uniform Voidable Transactions Acts. The program will discuss lender strategies for minimizing the risks of fraudulent transfer challenges before and after the loan is made.
Description
The landmark Seventh Circuit decision in Sentinel Management Group illustrated the risks lenders face if they fail to exercise due diligence with respect to a borrower's collateral. The court ruled that the lender could not assert a good faith defense to the debtor's fraudulent transfers because the lender had knowledge of a potential problem with the collateral and/or the operations of the borrower and failed to follow up. Cases in the years since this pivotal decision have held similarly.
Senior lenders also face risks with respect to highly leveraged borrowers such as in a leveraged acquisition financing situation like a leveraged buyout or a leveraged recap. In transactions that add substantial debt and give rise to a substantial risk of bankruptcy or insolvency, fraudulent transfers by a highly leveraged borrower to the lender may result in invalidation of the security interest or subordination of the lien.
Counsel to lenders must recognize red flags with respect to questionable conduct on the part of the borrower or high risk financial transactions that may give rise to fraudulent transfers and take effective due diligence measures to investigate the conduct and proposed transaction and take steps to protect its lien.
Listen as our authoritative panel analyzes fraudulent transfer risks that lenders face when payments made by the borrower to the lender are challenged in bankruptcy or under a state Uniform Voidable Transactions Act. The panel will suggest measures lenders should take to minimize the risks of fraudulent transfer challenges before and after the loan is made.
Presented By
Mr. Kessler represents debtors, creditors, and other parties-in-interest in a broad range of restructuring matters, including bankruptcy proceedings, out-of-court restructurings, and bankruptcy-related transactions. He advises clients in high-profile restructuring matters, finding business-oriented strategies designed to achieve client goals. Mr. Kessler has worked with debtors and creditors to navigate complex, multi-billion dollar distressed situations and regularly litigates high-stakes contested matters, adversary proceedings, and other complex civil cases. His practice spans a variety of industries and geographies, with a particular focus on cross-border matters, including acting as U.S. counsel in foreign restructurings and lead counsel in Chapter 15 proceedings.
Mr. Miller is a member of the firm's Bankruptcy & Restructuring Practice, where he handles corporate bankruptcy and restructuring matters for debtors and trustees. His representations also include official committees of unsecured creditors, asset purchasers, vendors and landlords. Clients in industries including blockchain/cryptocurrency, technology, insurance, restaurants, retail, health care and aviation look to Mr. Miller to counsel them regarding corporate restructurings. His work with cryptocurrency/blockchain matters includes advice on the treatment of digital assets in bankruptcy, including Bitcoin and NFTs. Mr. Miller frequently represents clients in bankruptcy litigation including preference and fraudulent transfer litigants. He has served as an expert witness in the areas of restructuring and insolvency and often speaks on these and related topics.
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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Date + Time
- event
Wednesday, March 18, 2026
- schedule
1:00 PM E.T.
I. Overview of fraudulent transfer law
A. Fraudulent transfer claims under Bankruptcy Code Section 548
B. State fraudulent transfer laws - Uniform Voidable Transactions Acts
II. Types of fraudulent transfers
III. "Inquiry notice" to lenders
IV. Effective due diligence measures
V. Best practices for avoiding fraudulent transfer claims
VI. Lessons from recent case law
VII. Practitioner pointers and key takeaways
The panel will review these and other key issues:
- Under what circumstances is a lender at risk of unknowingly receiving a fraudulent transfer?
- What information is likely to put a lender on "inquiry notice" to further investigate the borrower's situation?
- What are best practices for preventing secured lenders from becoming the target of a fraudulent transfer action?
- What are the latest trends and developments regarding fraudulent transfers, and how can lenders mitigate risks in this ever-evolving area?
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Complying With Money Transmission Laws: FBO Accounts and Other Exemptions, Federal and State Regulatory Framework
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