Justia Banking Opinion Summaries

Sentinel, a cash-management firm, invested customers' cash in liquid low-risk securities. It also traded on its own account, using money borrowed from BNYM, pledging customers’ securities; 7 U.S.C. 6d(a)(2), 6d(b)), and the customers’ contracts required the securities to be held in segregated accounts. Sentinel experienced losses that prevented it from maintaining its collateral with BNYM and meeting customer demands for redemption of their securities. Sentinel used its BNYM line of credit to meet those demands. In 2007 it owed BNYM $573 million; it halted customer redemptions and declared bankruptcy. BNYM notified Sentinel that it planned to liquidate the collateral securing the loan. The bankruptcy trustee refused to classify BNYM as a senior secured creditor, considering the use of customer funds as collateral to be fraudulent transfers, 11 U.S.C. 548(a)(1)(A) and claiming that BNYM was aware of suspicious facts that should have led it to investigate. The district judge dismissed the claim, finding that Sentinel had not been shown to have intended to defraud its customers. The Seventh Circuit reversed, holding that Sentinel made fraudulent transfers. On remand, the judge neither conducted an evidentiary hearing nor made additional findings, but issued a “supplemental opinion” that BNYM was entitled to accept the collateral without investigation. The Seventh Circuit reversed in part. BNYM remains a creditor in the bankruptcy proceeding, but is an unsecured creditor because it was on inquiry notice that the pledged assets had been fraudulently conveyed. View "Grede v. Bank of New York" on Justia Law

Ajayi, an electrical engineer, wanted to start a business selling MRI products in Africa. He incorporated GRI in Illinois and another company in Africa and sought investors. While traveling, he solicited a $45,000 investment from Brown. After returning home, Ajayi received a $344,657.84 check, payable to another company . He called Brown, who explained that the accounting department had made an error, told Ajayi to deposit the check, and stated that they would work out a way for Ajayi to refund the difference. Ajayi deposited the check through an ATM into his GRI account, which previously had a balance of $90.08, After the check cleared, Brown flew to Chicago and demanded repayment. Pursuant to Brown’s instructions, between December 9 and December 12, 2009, Ajayi wrote at least five checks to himself from the GRI account and cashed them. Ajayi was convicted of five counts of bank fraud, 18 U.S.C. 1344(1) and (2) and money laundering, 18 U.S.C. 1957(a) and was sentenced to 44 months’ imprisonment. The Seventh Circuit found that there was sufficient evidence that Ajayi knew that the check was altered and upheld the exclusion of the emails, but concluded that four bank fraud counts were multiplicitous. View "United States v. Ajayi" on Justia Law