In this opinion, the Delaware Court of Chancery refused to permit management of a hedge fund (the “Paige Fund”) to utilize the provisions of the partnership agreement of the Paige Fund’s Delaware investment vehicle to restrict the withdrawal by the Paige Fund’s only outside investor of its entire capital investment finding, among other things, that imposing such restrictions was a breach of a separate agreement entered into with such investor as well as a breach of fiduciary duty by management of the Paige Fund.
Fred Wilpon, the owner of the New York Mets, was a close friend of Bernie Madoff, and it has been generally believed since the outset of the scandal that Wilpon, his family and affiliated enterprises lost hundreds of millions in the great Ponzi scheme.
In a much-followed case given the recent publicity surrounding collapsed Ponzi schemes, the U.S. District Court for the Southern District of New York on September 17, 2010 reversed a decision of the Bankruptcy Court from the Southern District of New York that had broadened the scope of those facts and circumstances that may trigger inquiry notice under the "good faith" defense to a fraudulent conveyance claim.
Given the overarching Madoff Ponzi scheme as well as other mini-Madoff schemes that surfaced in its wake, many have been following issues arising from the ability of a trustee to claw back transfers (either as preferential or as fraudulent transfers) from investors who redeemed their interests in a private investment fund or managed account that turned out to be a Ponzi scheme.
In this case, the Court granted in part and denied in part the Defendants’ 12(b)(6) motion to dismiss for failure to state a claim.