Fraudulent Conveyance – The Recovery of Assets Fraudulently Hidden

When a debtor commits fraud, there are two separate and distinct to assist creditors. Based on their testimony and documentation, a debtor may appear to be insolvent and the debt or judgment uncollectible. However, it is always possible that they may have transferred assets to third parties or concealed assets that can be recovered, including leveraging offshore accounts or hiding wealth in digital currency (cryptocurrency).

Florida Proceedings Supplementary Statute

The Florida Proceedings Supplementary statute, Florida Statute 59.26, allows a judgment creditor to implead (add as a defendant) any person or entity that was the recipient of a conveyance made to defraud creditors or delay judgment collection. If the court determines that assets are improperly transferred, the assets may be returned to the debtor’s estate for sheriff’s levy, garnishment, or other execution.  Other remedies may hold the impleaded party liable for the debt, up to the amount of the improper conveyance. The statute is vague about enforcement mechanisms.  Courts, therefore, have broad discretion to fashion a remedy best serving the creditor while concurrently ensuring the impleaded defendant receives due process as required by law.

Florida Uniform Transfer Act

Florida Statute 726, the Florida Uniform Transfer Act, is the second remedy designed to assist creditors in recovering fraudulently transferred assets. This statute empowers a creditor to void fraudulent transfers both before and after a debtor’s judgment. It provides for, among other things, the appointment of a receiver or injunctive relief to stop or reverse a fraudulent conveyance.

Fraudulent Conveyance Quick Links

Offshore Transfers and CryptoCurrency

Combining the Florida Proceedings Supplementary Statute and the Florida Uniform Transfer Act

Depending on the facts of each case, both statutes and various remedies can be used together or separately. Each potential remedy has a different Statute of Limitations and other subtle differences. We frequently see transfers to family members, irrevocable trusts, and business entities that appear to indicate that the debtor has no interest in them at first glance. We can sometimes “peel back the covers” and find the trail that leads to a fraudulent conveyance.

Fair Market Value and Fraudulent Conveyance

One of the most important aspects of locating and recovering assets that have been fraudulently transferred is proving that the recipient did not pay “fair market value” for the assets. Subpoenaing financial records, closing statements, and other documents that may tell all or part of the story is required. The “fair market value” issue frequently arises when a company closes its doors and its principals open a new company, often at the same address, with the same inventory, and with the same employees. If a secured creditor is involved and has taken action to foreclose their security interest, the mystery may occasionally be solved. Typically, it is the creditor’s responsibility to conduct the investigation, subpoena records from the debtor and third parties, and take the initiative to prove the fraud and recover their money.

Offshore Transfers and CryptoCurrency

Debtors may occasionally transfer their assets offshore to a “safe haven.” While this can be difficult if it is economically feasible and depending on the jurisdiction of the foreign country, we can hire foreign counsel in that jurisdiction to assist our clients in recovering assets.

Similar to offshore transfers to safe havens, transfers to cryptocurrency is proving to be an emerging challenge in the practice of Fraudulent Conveyance, which might entail a technologist or a forensic accountant to help unravel.

We have over 30 years of experience discovering fraud and recovering assets using these remedies at Marcadis Singer, P.A. Please contact Gil Singer at gsinger@marcadislaw.com for more information.