Last year we wrote about Janvey v. Golf Channel, 780 F.3d 641 (5th Cir. 2015), in which the U.S. Court of Appeals for the Fifth Circuit held that advertising fees accepted by Golf Channel could be recovered as a fraudulent transfer by the court-appointed receiver of the failed Stanford International Bank Ponzi scheme. At that time, the circuit court reasoned that such advertising services, as a matter of law, provided no "value" from the perspective of creditors of the defunct scheme, as the entity providing these services contributed to a perpetuation of the scheme, albeit unintentionally. We expressed concern that this holding created uncertainty and risk for trade creditors who have unwittingly done business with a counterparty that operates a Ponzi scheme. On rehearing, however, the court vacated its holding and submitted a certified question to the Supreme Court of Texas to determine the applicability of the "reasonably equivalent value" defense under the Texas Uniform Fraudulent Transfer Act (TUFTA). Disagreeing with the federal circuit court, the Texas Supreme Court, in Janvey v. Golf Channel, No. 15-0489, (Texas April 1, 2016), ruled that "reasonably equivalent value" is determined ­objectively as of the time of the transfer, without reference to whether the transfer actually benefited creditors in retrospect.


Fraudulent transfer statutes like TUFTA generally provide an affirmative defense for transferees who can prove that they accepted a transfer in good faith and gave the debtor "reasonably equivalent value" in return. At issue in Janvey was whether approximately $5.9 million in advertising fees, accepted in good faith by Golf Channel, could be recovered by the court-appointed receiver of the failed Stanford Ponzi scheme.

Stanford International Bank Ltd. and its affiliates operated a classic Ponzi scheme, which targeted high-net-worth individuals by promising astronomical returns on deposits. Those high ­returns were paid with the fresh deposits of newly attracted investors. Stanford marketed itself to sports audiences due to the high percentage of wealthy individuals represented by this demographic. As part of its fundraising strategy, Stanford entered into an advertising deal with Golf Channel worth approximately $5.9 million over a four-year period.

In February 2009, the U.S. Securities and Exchange Commission brought an action against Stanford in the Northern District of Texas. The court-appointed receiver for the Stanford entities, Ralph Janvey, discovered the fees paid to Golf Channel and sought recovery of the entire $5.9 million as a fraudulent transfer.

Because it was undisputed that Stanford was engaged in a Ponzi scheme, Golf Channel stipulated to the fact that the payments it had received from Stanford constituted a fraudulent transfer. Golf Channel nonetheless raised the affirmative defense under TUFTA that it had accepted the ­payments in good faith and for "reasonably equivalent value." Golf Channel presented evidence establishing that the $5.9 million it received represented the market value for the advertising services it provided. The district court agreed, granting Golf Channel's motion for summary judgment and reasoning that "Golf Channel looks more like an innocent trade creditor than a salesman perpetuating and extending the Stanford Ponzi scheme."

Fifth Circuit Opinion

On appeal to the Fifth Circuit, the ­receiver did not dispute that Golf Channel had acted in good faith, so the only issue on appeal was whether Golf Channel's advertising services provided the estate with ­"reasonably equivalent value." Golf Channel again relied on evidence that it had been paid the fair market value for the advertising services it had provided.

The circuit court employed a two-step analysis to determine whether TUFTA's affirmative defense applied. Under the first step, the court asked whether the services exchanged had any "value" under TUFTA as a matter of law. Should "value" be found as a threshold matter, the court could proceed to the second step to review whether the actual value of the exchanged services was "reasonably equivalent" to the amount of the transferred fees.

In addressing "value" under the first step of its analysis, the court focused on Comment 2 to Uniform Fraudulent Transfer Act (UFTA) Section 3, that states, "Consideration having no utility from a creditor's viewpoint does not satisfy the statutory definition [of 'value']." Applying this principle, the circuit court focused on the degree to which the advertising services preserved the estate's net worth for creditors. But because each transaction in a Ponzi scheme exposes the estate to ever greater liabilities, the circuit court reasoned that any service to such an enterprise that encourages new investments fails to provide any value to creditors and in fact decreases the value of the estate. Thus, the circuit court did not reach the second step of the analysis because it held that Golf Channel's market value evidence failed, as a matter of law, to establish "value" to the estate's creditors under TUFTA. As a result, the circuit court held for the receiver.

On rehearing, however, the circuit court vacated its holding and certified the question to the Supreme Court of Texas to determine what showing of "value" would be sufficient under TUFTA—in light of the UFTA comment stating that "value" is measured from a creditor's standpoint—to prove an affirmative defense based on ­"reasonably equivalent value."

Texas Supreme Court Opinion

The Texas Supreme Court began its analysis by clarifying that although uniformity is a primary goal of TUFTA, "UFTA's comments were not adopted by our legislature and cannot alter the plain meaning of the words enacted." Likewise, the Supreme Court emphasized that "TUFTA is unique among uniform fraudulent-transfer laws because it provides a specific market-value definition of 'reasonably equivalent value.'" Under TUFTA, "Reasonably equivalent value" is defined specifically to include "a transfer or obligation that is within the range of values for which the transferor would have sold the assets in an arm's-length transaction." According to the court's interpretation, the words "would have" in the foregoing definition indicate the ­legislature's intention that ­"reasonably equivalent value" be analyzed "objectively at the time of the transfer, not in retrospect."

Addressing next the UFTA comment requiring a finding of "utility from a creditor's standpoint," the court explained that—even if UFTA's comments were controlling—this standard would neither mandate a subjective valuation method nor permit a ­retrospective one. Instead, as the Supreme Court explained, "an objective inquiry ... from a reasonable creditor's perspective at the time of the transaction" is consistent with TUFTA's definition, and appropriately balances the interests of creditors against third-party vendors that give reasonable value in good faith.

Accordingly, the Texas Supreme Court ruled that, under TUFTA, the "reasonably equivalent value" requirement can be satisfied with evidence that the transfer in question: (1) was an arm's-length contract for fair market value; (2) involved consideration that had objective value at the time of the transaction; and (3) occurred in the ordinary course of the transferee's business.


When we reported on the Fifth Circuit's initial Janvey opinion last year, we predicted that innocent trade creditors could be susceptible to draconian clawbacks in the Ponzi scheme context, unless they were able to prove that their goods or services provided actual value to the scheme's creditors: under the original rationale of the Fifth Circuit, providing goods or services to an entity operating a Ponzi scheme—by definition—could almost never be for "value" because such goods or services could be deemed to have perpetuated an operation decreasing in value, thereby providing no utility from a creditor's viewpoint. For example, we ­queried whether the Ponzi scheme's local pizzeria would be subject to clawbacks under Janvey for simply delivering pizza to the scheme's employees who would be enabled thereby to work longer hours in furtherance of the scheme. Happily, the Texas Supreme Court resolved this uncertainty in favor of unwitting trade vendors. For now, these vendors can breathe a sigh of relief; under the Texas Supreme Court's analysis, they may safely rely on TUFTA's "reasonably equivalent value" defense so long as they provide their goods or services at arm's-length, in the ordinary course of business, and for fair market value.

This article originally appeared in The Legal Intelligencer and is republished here with permission from