In re Foster
United States Court of Appeals for the Tenth Circuit
275 F.3d 924 (2001)
- Written by Tammy Boggs, JD
Facts
Bryan K. Foster (debtor) operated Ponzi schemes in which he paid earlier investors with funds received from new investors rather than profits derived from a legitimate business. Dale Kinzler (defendant) was one such defrauded investor. Foster deposited and commingled defrauded investors’ funds in general bank accounts. In August 1996, several defrauded investors filed a Chapter 7 bankruptcy petition against Foster. After the bankruptcy petition was filed but before agreeing to entry of a relief order, Foster initiated a series of monetary transfers to Kinzler. The bankruptcy trustee (plaintiff) sought to void the unauthorized transfers to Kinzler. In opposition, Kinzler argued that the transferred funds were subject to a constructive trust and thus not part of the bankruptcy estate. The bankruptcy court agreed with Kinzler, applying the lowest-intermediate-balance rule. The district court affirmed, and the bankruptcy trustee appealed.
Rule of Law
Issue
Holding and Reasoning (Baldock, J.)
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