There are fraudulent conveyance laws that prohibit a debtor from transferring the debtor’s assets for less than adequate consideration if: (i) the transfer makes the debtor insolvent, or (ii) the transfer occurs when the debtor is insolvent. One of the remedies available to a creditor who proves that a transfer of property was a fraudulent conveyance, is to set aside the transfer so that the creditor can use the legal collection process to realize the value of the property transferred.
Debtors who engage in fraudulent conveyances expose themselves and their co-conspirators, if any, to substantial legal problems and liabilities. A fraudulent conveyance can also be a crime.
Seattle real estate developer Michael R. Mastro filed for bankruptcy in what may be Western Washington state’s biggest personal bankruptcy. His schedules filed with the court listed total debts of $587 million and assets of $249 million.
The bankruptcy trustee James Rigby sued Mr. Mastro to set aside transfers of property that Mr. Mastro made before filing for bankruptcy.
In his suit, filed in federal bankruptcy court, Rigby says the transfers of the mansion, car and jewelry were done “with actual intent to hinder, delay or defraud creditors” after Mastro sensed his real-estate empire was collapsing. Mastro and his wife bought the mansion on Evergreen Point Road in 2006, according to county records. Through a series of transfers that began in June 2008 and involved no money, the home ended up under the ownership of a Delaware limited liability corporation.
The assets transferred include a mansion purchased for $15 million, a Rolls Royce and jewelry including five rings containing diamonds ranging from 9.68 to 27.8 carats. Sounds like Mr. Mastro has a whole lot a ‘splainin to do.
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