The trustee in bankruptcy moved for a phase-one determination that profit payments made by Douglas Grozelle to net winners in a fraudulent Ponzi scheme were void as against creditors and recoverable for the estate.
The court found the hallmarks of a Ponzi scheme, held insolvency and fraudulent intent could be inferred globally, and concluded the payments were void under the Fraudulent Conveyances Act and not saved by good-faith or good-consideration defences.
The court approved a two-stage insolvency process: common liability issues resolved summarily now, with individualized quantum determinations in phase two.
The winners’ cross-motion for broad directions attacking the trustee’s process and authority was dismissed.
