The Supreme Court of Texas recently held that the transfer of $5.9 million from Stanford International Bank Ltd. to the Golf Channel for media-advertising services was not recoverable as a fraudulent transfer, even though Stanford used the services to promote its Ponzi scheme. In Janvey v. Golf Channel, Inc., 487 S.W.3d 560 (Tex. 2016), R. Allen Stanford used Stanford International Bank Ltd. to perpetrate a multi-billion dollar Ponzi scheme for nearly two decades. To that end, Stanford paid the Golf Channel approximately $5.9 million to advertise its services and activities. After Stanford was put into receivership, a court-appointed receiver sought to recover the payments Stanford made to the Golf Channel under Texas’s Uniform Fraudulent Transfer Act (“TUFTA”) as fraudulent transfers. TUFTA, however, prohibits the recovery of a fraudulent transfer if the transferee took the transfer in good faith and for a reasonably equivalent value. While the Golf Channel argued that its advertising services provided value in exchange for the transfers, the receiver claimed otherwise, arguing that there is no “value” unless the transaction leaves the transferor’s estate with a tangible asset on which creditors can levy execution. On cross-motions for summary judgment, the federal district court held in favor of the Golf Channel. On appeal, the Fifth Circuit reversed the district court’s ruling and held that the media-advertising services “provided zero value to a Ponzi scheme’s creditors.” The Fifth Circuit, however, later vacated its opinion and asked the Texas Supreme Court to determine what constitutes “value” under TUFTA’s good faith affirmative defense. In answering the Fifth Circuit’s question, the Texas Supreme Court held that the reasonably equivalent value requirement can be satisfied with evidence that the transferee (1) fully performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration that had objective value at the time of the transaction, and (3) made the exchange in the ordinary course of the transferee’s business. The court further held that it was not necessary that the consideration provided preserve the debtor’s estate, just that it had an objective value, and that the standard does not differ in the context of a Ponzi scheme. Accordingly, the court ruled that the media-services provided by the Golf Channel had an objective value at the time of the transfer, ultimately leading to the Golf Channel’s victory.
