In re Hypnotic Taxi, LLC
United States Bankruptcy Court for the Eastern District of New York
543 B.R. 365 (2016)
Attorney and taxi mogul Evgeny Freidman (defendant) borrowed over $30 million from Citibank (plaintiff) secured by taxi medallions (permits to operate taxis in New York). The medallions’ value plummeted after companies like Uber entered the market. When Freidman defaulted on the loans, Citibank seized the medallions, and Hypnotic Taxi, LLC and other companies holding the medallions (debtors) filed for bankruptcy. Citibank sought to collect on Freidman’s personal guarantees by attaching Freidman’s real estate. Freidman set up offshore trusts with himself, children, and parents as beneficiaries, then transferred all attachable assets into the trusts. Almost six months later, the trustees had done nothing, and Freidman retained possession and control of his real estate. The court held a hearing to determine whether Freidman made the transfers with intent to defraud creditors, meaning Citibank could still attach the assets. Freidman testified that he was estate planning to support his children, but the court found him unbelievable. Freidman argued that other assets, largely the taxi medallions, could still satisfy the debt. Freidman also argued that Citibank could not attach property he did not own, failed to join third parties, and had to specify the attachable property.
Rule of Law
Holding and Reasoning (Craig, C.J.)
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